A warning from the OECD that some red lights may be flashing on the dashboards of major economies helped drag crude oil prices lower early Tuesday. File photo by John Angelillo/UPI | License Photo
Nov. 28 (UPI) -- A lack of clarity over what happens next with OPEC's production agreement and a weak economic growth outlook for 2018 sent oil prices lower early Tuesday.
Angel Gurria, the secretary general for the Organization for Economic Cooperation and Development, said global growth is accelerating from 3.1 percent in terms of gross domestic product last year to 3.6 percent in 2017.
"Over the past couple of quarters global GDP has actually been growing even faster than this, at an annualized rate of over 4 percent," he said in a speech from Paris.
For the first time in 10 years, the pace of growth is such that none of the major world economies is in a recession. Nevertheless, growth is lopsided, wages aren't keeping pace with the economy, household debts are rising and "danger signs are flashing" for some real estate markets.
"Growth has picked up momentum and the short-term outlook is positive, but there are still clear weaknesses and vulnerabilities," Gurria said.
Growth next year is forecast at 3.7 percent.
The price for Brent crude oil was down 0.7 percent at 9:15 a.m. EST to $63.39 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.5 percent to $57.82 per barrel.
Gurria's speech comes as traders watch energy markets to get an understanding of the supply and demand metrics that could influence commodity prices like oil and natural gas. In Vienna this week, members of the Organization of Petroleum Exporting Countries sit down to discuss the fate of a production agreement aimed at draining the surplus from the five-year average in global crude oil inventories.
In an interview with commodity pricing group S&P Global Platts, Haitham al-Ghais, the Kuwait governor to OPEC, offered few specifics when asked if ministers will move on a three-, six- or nine-month extension to an agreement that expires in March.
"It's just a matter of agreeing on the terms of the extension -- the duration mostly -- and what's the best workable scenario for everybody to move forward," he said.
Russian energy officials earlier this month cast a shadow over the situation when they said they were satisfied with current market conditions. Russia is the largest non-OPEC contributor to the agreement.
The OPEC production agreement, which went into force in January, has been credited with establishing crude oil prices above the $50 per barrel mark. That price point, however, is enough for shale oil producers in the United States to look forward to next year with higher output and profitability.
Joe McMonigle, a senior energy analyst at Hedgeye Risk Management, said in an emailed commentary from Vienna that some parties to the agreement are concerned about what happens in U.S. shale oil with Brent crude oil prices above $60 per barrel.
"Just two days before OPEC's meeting, it's clear that U.S. shale's shadow is looming large over the delegations arriving today in Vienna," he said.
OPEC economists in October said that if the price for WTI holds above $55 per barrel next year, it would encourage U.S. oil producers to expand their drilling activity.