Reuters: Oil drops as market awaits ratification of OPEC+ supply cut

09:00, 06 December 2019
Economy
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REUTERS

Brent futures LCOc1 were down 21 cents, or 0.3%, at $63.18 by 0258 GMT, Reuters said.

West Texas Intermediate oil futures CLc1 fell 14 cents, or 0.2%, to $58.29 a barrel. They hit $59.12 a barrel on Thursday, the highest since the end of September.

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The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia - a grouping known as OPEC+ - agreed to more output cuts to avert oversupply early next year as economic growth stagnates amid the U.S.-China trade war.

The agreement, which needs to be formally adopted later on Friday, will cut an extra 500,000 barrels per day (bpd) of production, through tighter compliance and some adjustments. The group has been withholding 1.2 million bpd and the increased amount represents about 1.7% of global oil output.

The "decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance," said Edward Moya senior market analyst at OANDA.

A panel of ministers representing OPEC and non-OPEC producers led by Russia recommended the cuts, according to Russian Energy Minister Alexander Novak on Thursday.

Details need to be hammered out at an OPEC+ meeting that starts later on Friday in Vienna.

Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

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