Oil Futures Higher, But Poised for Weekly Loss

Non-OPEC producers are also expected to cut production by 0.6m b/d, with Russian Federation announcing a gradual cut of 0.3m b/d in H1 2017.

Saudi Arabia said Monday afternoon that it would cut its official selling prices to Asia, indicating that it would continue to strive to maintain market share.

Second, when it comes to the allocation within OPEC, the cartel has taken an unusually differentiated approach. Other non-OPEC nations are expected to match Moscow’s cut in total. A price recovery above $50/b could contribute to supply growth in USA tight oil regions and in other non-OPEC producing countries that do not participate in the OPEC-led supply reductions.

On Wednesday the U.S. Energy Information Administration showed that crude-oil stockpiles declined by 2.4 million barrels for the week ended December 2. from the previous week, a larger-than-expected fall in storage. Economies exporting oil at that time were making merry. Saddled with budget deficits, the country cut spending and burned through more than a quarter of its foreign financial reserves in two years. However, the agreement only resulted in small changes to the STEO forecast.

Some analysts have taken the position that the announcement isn’t really a game changer because it will be hard to actually curtail overall production.

“Non-OPEC producers, such as Mexico, Azerbaijan and Colombia, are likely to dress up involuntary production declines, already factored in by traders, as cuts”, according to Bloomberg.

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 United States shale oil producers.

The other aspect of normalizing markets is the demand side of the equation.

Oil prices have picked up again to some extent on Wednesday morning, now sitting at $51.17 for US crude, up 0.51% from the late session’s close, having touched a low of $47.04.

“Other than a complete deal collapse, we don’t see many catalysts to reverse the recent rally”, USA bank Morgan Stanley said, adding that “a greater shift towards bullish positioning” was, in fact, pointing towards higher prices. However, OPEC moving away from its objective of pushing down prices is one of the most important. “The market is clearly in an upward trend”.

In this sense, oil prices are a mixed driver for the coal industry (KOL) in the US.