London - Oil extended losses after the biggest slump in
three weeks as OPEC’s move to prolong supply cuts for nine months disappointed
investors hoping for more than the plan that had been flagged days earlier.
Futures slid as much as 1.4 percent in New York after
sinking 4.8 percent on Thursday. The cuts are working and stockpile reductions
will accelerate in the third quarter, with inventories falling to the five-year
average early next year, Saudi Arabia’s Energy Minister Khalid Al-Falih said
after OPEC met in Vienna. Producers have more tools to further support prices
if needed, Russia’s Energy Minister Alexander Novak said in a Bloomberg
television interview.
Oil had climbed back above $51 a barrel after Saudi
Arabia and non-OPEC member Russia rallied support from the Organization of
Petroleum Exporting Countries and other nations to extend the deal into 2018.
While stubbornly high global inventories have taken longer than expected to
drain, signs that US stockpiles are easing from a record had added to the
optimism.
“OPEC delivered what they said they would, or at least
what they flagged they would do,” Wayne Gordon, executive director for
commodities and forex at UBS Group’s wealth management unit, said in a
Bloomberg television interview. “The market is tightening up and the statistics
are showing that. Inventories in the US are going to come under material
pressure in the next month or two, and we think that’s what’s needed to really
put a fire under prices.”
West Texas Intermediate for July delivery slid as much as
69 cents to $48.21 a barrel on the New York Mercantile Exchange and was at
$48.58 at 1:06 p.m. in Hong Kong. Total volume traded was about 80 percent
above the 100-day average. Prices slumped $2.46 to $48.90 on Thursday, the
biggest decline on a percentage basis since May 4. WTI is down 3.5 percent this
week.
Read also: Oil halts advance after four-day gain
Brent for July settlement lost as much as 58 cents, or
1.1 percent, to $50.88 a barrel on the London-based ICE Futures Europe
exchange. The contract lost $2.50, or 4.6 percent, to $51.46 on Thursday. The
global benchmark crude traded at a premium of $2.63 to WTI.
See also: OPEC leaves market guessing on exit strategy
after historic pact
Energy companies led declines among equities in Asia,
with the MSCI Asia Pacific Energy sub-index dropping 0.9 percent. Japan’s Inpex
lost 2.1 percent while Australia’s Woodside Petroleum Ltd. fell 2.5 percent.
“Some market participants may have expected either a
deeper cut, a longer one, inclusion of more countries, or other such icing on
the cake,” analysts at Barclays Plc including Michael Cohen wrote in a research
note. The selloff “is likely short lived, and we continue to believe that inventory
draws in the coming summer months will be supportive of prices.”
Rising U.S. shale output won’t derail OPEC’s goals and a
nine-month extension will “do the trick,” Al-Falih said Thursday after the
meeting in Vienna. Nigeria and Libya will remain exempt from making cuts and
Iran, which was allowed to increase production under the original accord,
retains the same output target, said Kuwait’s Oil Minister Issam Almarzooq.
BLOOMBERG