Oil prices down more than 1% amid OPEC tensions

Bob McNally, president of Washington-based consultancy Rapidan group, said on Twitter that compliance with cuts would be key: “In deals with Russia, OPEC is like (the late U.S.) President (Ronald) Reagan used to say: “Trust but verify”.

As tensions within OPEC mounted, Saudi Energy Minister Khalid al-Falih said at the weekend that oil markets would rebalance even without an output-limiting pact.

Oil traded above $46 a barrel in NY as Iraq pledged to cooperate with OPEC to reach an agreement this week that is acceptable to all members.

In recent weeks, Riyadh offered to cut its own output by 0.5 million bpd, according to OPEC sources, and suggested Iran limit production at below 4 million bpd.

At a meeting in Algiers in September, Opec agreed to slash output that at today’s levels would mean reducing volumes by between 200,000 barrels a day (b/d) and 700,000 b/d.

In addition to forming a strategy to cope with rising oil production from non-OPEC members, OPEC’s talks on new quotas have also wrestled with the question of how to handle production in Iran as Saudi Arabia’s top rival emerges from worldwide sanctions.

Brent crude oil prices last topped $51 per barrel in mid-October as rumors circulated over the prospects for a deal in Vienna.

OPEC is also proposing a 600,000 barrel a day output cut by non-OPEC producers. OPEC officials say talks are at least continuing, and so a deal isn’t off the table completely just yet.

OPEC aims to remove a supply glut and prop up oil prices, which at below $48 a barrel are less than half their level of mid-2014. Non-OPEC oil producer Russian Federation seemed to be open to joining in, or at least to freezing its own production. Consequently, crude oil prices extended their downward streak in early Asian trade on Monday.

Brent crude futures LCOc1 were trading at $46.40 per barrel at 0035 GMT (7.35 a.m. ET), down 84 cents, or 1.8 percent, from their last close.

Eiichiro Kitahara, Executive Officer of Japanese refiner TonenGeneral Sekiyu K.K said that “once oil prices reach above $60/barrel, (U.S.) shale oil producers are likely to resume operations, which will weigh on the market”.

“Do not take an announcement of a headline cut of 1 million barrels per day (bpd) at face value”.

Brent crude futures for delivery in January were up $3.83, or 8.3 per cent, at $50.21 a barrel by 1236 GMT, recovering from a drop of almost 4 per cent on Tuesday and on course for their biggest one-day move in nine months.