OPEC ready to talk amid falling oil prices

31 Aug 2015 | Author: | No comments yet »

OPEC says there’s ‘no quick fix’ for low oil prices.

Oil capped the biggest three-day gain in 25 years after OPEC said it’s ready to talk to other global producers to achieve ‘fair prices’ and the U.S. government reduced its crude output estimates. The Organization of the Petroleum Exporting Countries on Monday said there is “no quick fix” for the low oil-price environment and voiced concern about its impact on the petroleum industry.

Oil prices turned higher Monday on speculation that oil-producing nations might be willing to agree to output cuts to shrink the global glut of crude oil.New York: Oil prices surged more than 5% Monday, continuing a three-day rally that has erased August’s price declines, after US oil production data showed output falling and OPEC said it would talk with other producers about low prices.

In commentary released Monday, OPEC said continuing pressure on prices “remains a cause of concern for OPEC and its members,” as well as for “all stakeholders in the industry.” West Texas Intermediate and Brent crude futures have dropped by roughly half from the year ago level. An oversupply of crude oil has sent oil prices plunging to six-year lows in recent months, and many market watchers don’t expect prices to recover until late 2016 or 2017. Crude futures rebounded after retreating early Monday, spiking as new US government figures indicated production was lower than initially reported for the first half of the year.

On Monday, however, October crude CLV5, +8.23% was up nearly 6% at $47.86 a barrel on the New York Mercantile Exchange, while Brent crude LCOV5, +7.69% on the ICE Futures exchange added 5.7% to $52.90 a barrel. US domestic crude oil production peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months, Energy Information Administration (EIA) data showed on Monday.. The abrupt turnaround in oil prices has prompted a rally among beleaguered energy stocks on the Toronto Stock Exchange, pushing the S&P/TSX Capped Energy Index up 1.5 per cent so far today. Most other sectors are in the red, however, driving Toronto’s benchmark S&P/TSX Composite Index to a decline of about 69 points at mid-day, to 13,796.

And “failure to invest now could mean prices in the coming years spiking to levels inconsistent with what is considered ‘reasonable’ for both producers and consumers,” it said. Saudi Arabia, OPEC’s largest producer, will continue to defend its market share, “producing at record levels, especially with Iranian oil coming online” following an agreement with the West over Iran’s nuclear program. Since November, OPEC countries led by Saudi Arabia have kept production high to maintain market share, even as prices have plummeted. “There’s extreme volatility, with London out and the market is rallying on the OPEC headline,” said Scott Shelton, commodities specialist at ICAP in Durham, North Carolina, referring to a bank holiday in Britain.

The OPEC comments follow a report Thursday that Venezuela was pushing for an emergency meeting of the oil cartel in coordination with non-OPEC Russia to find a way to stem the oil-price rout. Separately, a Kremlin aide said Monday that Russian President Vladimir Putin will discuss “possible mutual steps” to stabilize the global price for oil at a meeting with Venezuelan President Nicolas Maduro in China on Thursday. OPEC’s statement “that they’re willing to work with other countries … was a big deal,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. “That has rallied the market strongly.” Previous attempts in the past 12 months to discuss cooperation with non-OPEC producers have brought no results. But Iran’s oil minister Bijan Zanganeh said Saturday there was a consensus within the group that $80 per barrel was an equitable price—echoing a target previously given by Iraq and Venezuela.

The newly released federal data confirmed that U.S. oil output has taken a hit from lower oil prices, as new investments have proven uneconomic and some companies have struggled to stay afloat. The updated data “will encourage more bottom-picking,” as traders pile into the market in expectation that production will keep falling, said Olivier Jakob, managing director of oil-advisory firm Petromatrix. “We went through a wave of [production] increase, but now this is starting to come to an end.” Prices for Canadian synthetic crude for September delivery traded between 65 cents and $2 a barrel below the U.S. benchmark, according to brokerage Net Energy.

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