Oil posted the biggest weekly decline since November as traders await proof that OPEC and other producers are following through on promises to cut production.
Futures declined 1.2 percent in New York on Friday and slid 3 percent this week. Saudi Arabia reduced output to less than 10 million barrels a day and will consider renewing its pledge to trim supply in six months, according to Energy Minister Khalid al-Falih. Still, until monthly production data is released, “these claims cannot be verified,” according to Commerzbank AG. The U.A.E. doesn’t intend to reduce output more than was agreed upon with OPEC in November and a tanker is said to sail to Libya’s Zawiya port to load Sharara crude.
Oil has advanced since the deal among members of the Organization of Petroleum Exporting Countries and 11 other nations to temper global supply. It has been unable to sustain its rally above $55 amid concern that rising prices will spur more production. While Middle East producers including Saudi Arabia have signaled they’re sticking to the pledged reductions, the U.S. Tuesday raised this year’s output forecast.
“We’re seeing strong compliance from the usual suspects, the Saudis and their Gulf counterparts,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. But U.S. output rose by 176,000 barrels a day last week and “the exempted countries are going gangbusters in production and exports,” he said.
Rig Count
West Texas Intermediate for February delivery slid 64 cents to settle at $52.37 a barrel on the New York Mercantile Exchange. Total volume traded was about 11 percent below the 100-day average.
Brent for March settlement dropped 56 cents to end the session at $55.45 on the London-based ICE Futures Europe exchange. The global benchmark was at a premium of $2.30 to March WTI.
See also: Oil market stars fade as tankers laden with crude idle off China
Explorers reduced U.S. rigs searching for oil for the first time since October, after expanding to the highest level in a year the previous week. The increase has helped fuel a rebound in U.S. oil production, which rose to the highest level since April last week.
The OPEC supply deal has only been in effect for two weeks, and the group will adopt compliance mechanisms at a meeting in Vienna on Jan. 22, OPEC Secretary-General Mohammad Barkindo said in a Bloomberg Television interview in Abu Dhabi on Friday.
The caps on supply, together with rising demand and natural decreases in output in some countries, will help balance the market and support prices, al-Falih said at an energy conference in Abu Dhabi on Thursday. The last time Saudi production came in below 10 million barrels a day was in February 2015, according to data compiled by Bloomberg.
“The markets are trying to get a sense of what sort of compliance we will get,” Abhishek Deshpande, chief energy analyst at Natixis SA in London, said by telephone. Producers are seeing that oil prices have not climbed to $60 yet, “and if they want that, they must provide the market with confidence.”
Oil-market news:
Kazakhstan may not be able to extend its commitment to helping OPEC curb global oil supply into the second half because its giant new field will accelerate production. China’s oil imports last year expanded at the fastest pace in six years as the cheapest crude in more than a decade triggered stockpiling and independent refiners accelerated purchases. Royal Dutch Shell Plc oil workers began a strike in Gabon after talks failed.
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