January 22, 2018, by Alex Longley and Ben Sharples
Brent crude declined even after Saudi Arabia and Russia pledged over the weekend to continue oil supply cuts.
Futures in London slipped 0.2 percent, erasing earlier gains. Output limits should remain through 2018 as re-balancing may be achieved next year, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a Bloomberg television interview held with his Russian counterpart on Sunday. Russia is prepared to cooperate with OPEC after the current curbs expire, Energy Minister Alexander Novak said. Neither minister said whether the cuts would continue next year.
Benchmark Brent has eased after supply curbs by the Organization of Petroleum Exporting Countries and its allies to reduce a global glut earlier this month pushed prices above $70 a barrel for the first time since December 2014. Banks including Citigroup Inc. and JPMorgan Chase & Co. predict the coalition may begin winding down cuts from the middle of the year, before a scheduled end in December, as the market re-balances. There was no sign of such a move at this weekend’s meeting between OPEC members and some of their allies in Oman.
“We already knew that the Saudis would like to have more permanent cooperation in the oil market,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. “Al-Falih wants more stability and more control over the oil market.”
Brent for March settlement fell 14 cents to $68.47 a barrel at 1:01 p.m. on the London-based ICE Futures Europe exchange. The contract closed 1 percent lower at $68.61 on Friday, falling for a second day. It traded at a premium of $5.27 to March West Texas Intermediate.
WTI for February delivery, which expires Monday, slipped 6 cents to $63.31 a barrel on the New York Mercantile Exchange, after falling 1.5 percent last week. Total volume traded was at about 20 percent below the 100-day average. The more-active March contract fell 10 cents to $63.21.
OPEC and its allies see merit in maintaining their output limits into 2019, Oman Oil Minister Mohammed Al Rumhy told reporters before a meeting to assess compliance with the accord. The compliance rate among all participants in 2018 will beat the 107 percent average in 2017, Saudi Arabia’s Al-Falih said.
Iraq’s oil minister told reporters in Baghdad that global oil inventories are falling and that the market will be stable by the end of 2018. Halliburton Co.’s fourth-quarter earnings took a $1.3 billion hit from unpaid bills in Venezuela and President Donald Trump’s U.S. tax overhaul. Philadelphia Energy Solutions LLC, owner of the largest oil refinery serving the New York Harbor gasoline and diesel market, filed for Chapter 11 bankruptcy protection.