Oil prices down on world market

By Azernews

By Nigar Abbasova

Turbulence regained its dominance in the energy market and oil futures drop on December 22, dragged down by an unexpected rise in U.S. crude inventories and intention of Libya to boost its output over the next few months.

Brent futures fell by 1.6 percent or 89 cents to stand at $54.46 per barrel, while US West Texas Intermediate (WTI) crude lost some 1.5 percent or 81 cents and traded at $52.49 per barrel.

The price of a barrel of Azeri Light crude oil decreased $0.79 to stand at $56.35. The price for URALS-NOVO was $51.28 per barrel on December 21, or $0.96 less than the previous price.

The U.S. Energy Information Administration said crude stockpiles in the country rose by 2.3 million barrels in the week, posting a surprise increase and ruining American Petroleum Institute (API) forecast of a drop by 4.1 million barrels.

The news about more crude supply from Libya, which is excluded from the production cut agreement, became like a thunder in the clear sky, as Libya’s National Oil Corporation (NOC) confirmed that pipelines leading from Sharara and El Feel fields had reopened, with the expectation of additional 270,000 barrels per day (bpd) to local production over the next three months.

However, optimism that oil producers would stay committed to the production cut pledges prevented prices form stronger losses.  The fact that the biggest cuts are expected to come from the Gulf States and Russia that show intentions in securing the agreement adds confidence in material compliance.

Russian Energy Minister Alexander Novak earlier said trust between oil producing countries is important if the global deal to curtail output is to succeed. The minister also proposed to hold the first meeting of the high-level monitoring committee set by OPEC to oversee the implementation of oil production cuts.

Russia’s 2016 oil output is expected to total 547.5 million tonnes (11 million barrels per day), a 2.5 percent increase from the last year. The participation pledge of Russia in output cuts stands at stands at 300,000 bpd, which accounts for a lion’s share of the total non-cartel participation of 558,000 bpd.

The committee includes five ministers, three of them - Venezuela, Algeria and Kuwait being OPEC members, and two (Russia, Oman) from non-OPEC countries. 

While contribution from OPEC and non-OPEC states is planned to amount to almost 1.8 million bpd starting from January 1, 2017, oil market still faces volatility.