Published: Sun, December 11, 2016
Economy | By Melissa Porter

Oil prices drop on doubts about output cuts

U.S. West Texas Intermediate crude was at $51.39 a barrel, down 40 cents.

London Brent crude for February delivery was up 17 cents at $54.06 a barrel by 0612 GMT, after settling up 1.7 percent on Thursday.

Russian Federation announced Wednesday that national oil companies backed cuts of 300,000 bpd but news agencies quoted Lukoil chief executive Vagit Alekperov as saying "no decision was made".

OPEC agreed last week to slash output by around 1.2 million barrels per day beginning in January in an effort to reduce global oversupply and prop up oil prices. Russian Federation has said it would reduce output by around 300,000 bpd.Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said on Wednesday OPEC's deal to cut production will go ahead even if Russian Federation becomes the only non-OPEC country to commit to reduce output at a meeting this weekend."While this weekend's meeting with non-OPEC producers will likely be hyped as a major breakthrough, we are maintaining an opinion that any non-OPEC production cuts will be largely of the involuntary variety", Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

FXTM research analyst Lukman Otunuga said there is growing concern that Russia's oil production continues to hit fresh post-Soviet highs each month while the country's officials repeatedly state that output cuts will be implemented moderately.

Oil prices rebounded from overnight lows on Wednesday, but concerns over hurdles facing a planned output cut by the Organization of the Petroleum Exporting Countries checked gains.

The benchmarks remain more than $1 below the highs reached December 5 in the wake of the OPEC deal. It will be interesting to see how other non Opec members respond.

The United Arab Emirates' energy minister said he was optimistic that non-OPEC producers would pledge cuts.

And Russia reported November average daily oil production at 11.21 million bpd, its highest in almost 30 years.

OPEC now seeks a global cut of 1.8 million barrels a day to help rebalance the market.

Iraq's Oil Minister Jabbar Allibi expressed hope to witness stability in the oil market already in the first half of 2017.

The poll forecast US light crude will average $43.46 a barrel in 2016 and $55.23 in 2017.

It also represented a dramatic reversal from OPEC's Saudi-led game plan, introduced in 2014, of flooding the market to force out rivals, in particular U.S. shale oil producers.

"The crude oil stock draw does not go against the rebalancing theme of OPEC cuts", he said in an emailed report.

The market is waiting on weekly data on USA oil rig counts issued by oil services firm Baker Hughes later on Friday.

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