Agency report indicated that, oil futures fell Monday on concerns about major oil producers’ wavering commitment to output caps as a meeting of the Organization of the Petroleum Exporting Countries, OPEC, gets under way.
The two-day gathering in Abu Dhabi, United Arab Emirates, will focus on members’ compliance level to the output pact the cartel signed with 10 other oil suppliers, including Russia, in late 2016. The deal so far hasn’t produced meaningful effect in tamping down global output or inventories.
On the New York Mercantile Exchange, crude futures for delivery in SeptemberCLU7, -1.80% sank 89 cents, or 1.7%, to $48.72 a barrel in the Globex electronic session. October Brent crude LCOV7, -1.62% on London’s ICE Futures shed 80 cents, or 1.6%, to $51.61 a barrel.
Oil futures are being weighed down by, “concerns over compliance with the OPEC cuts,” said Emily Ashford, director of energy research at Standard Chartered.
Investors are also anticipating the end of the summer driving season, which exhibited strong consumer demand for gasoline and low inventories.
“That may change in the next few weeks, which makes the picture slightly more bearish than it has been,” said Ashford.
Prices had settled higher on Friday, amid a solid U.S. employment report and the Baker Hughes ’ weekly rig count showing a net decline in the past week of one in active U.S. oil-drilling rigs.
One major development the market will be watching for out of the OPEC meeting is if Libya will join the agreement to cap output. The African supplier, along with Nigeria, was exempted from the initial deal because their output was marred by months-long militant attacks.
However, as both nations are now pumping closer to their peak levels, there is a growing view that they should also abide by production caps.
According to S&P Global Platts, the combined July output of both African producers was 590,000 barrels above October’s, a baseline that deal participants used to determine their production caps.
There is a “mix of optimism, and perhaps sustained hope, that more compliance can be achieved” at the OPEC meeting, said Barnabas Gan, an economist at the Singapore-based OCBC.
Nymex reformulated gasoline blendstock RBU7, -2.25% — the benchmark gasoline contract — declined more than 2% to $1.608 a gallon, while natural gas for September delivery NGU17, +0.40% rose 1.7 cents, or 0.6%, to $2.7910 per million British thermal units.