By Prince Okafor
The price rally that followed the previous week’s breakthrough in production output freeze by members of the Organisation of Petroleum Exporting Countries, OPEC, appears to be buckling as crude oil price slipped a second day on speculation that the OPEC agreement to trim crude output will not succeed in reducing supply.
But OPEC Secretary-General, Mohammed Barkindo, said yesterday, that talks with Russia about limiting crude oil production have been very constructive.
Barkindo also said that most of the work on an agreement was already done and countries including Russia, Azerbaijan, Algeria and Venezuela, will still meet to “compare notes.” OPEC supply quotas will be decided at the group’s official gathering late November in Vienna.
International oil prices had rallied since previous week from USD45 per barrel average in September to a year high of USD53.7 per barrel last weekend.
However, a major price reversal was again recorded on premium crude, Brent, yesterday when it fell 1.04 per cent to USD51.74, from USD52.28.
Similarly, West Texas Intermediate for November delivery fell 76 cents, or 1.5 percent, to $50.03 a barrel on the New York Mercantile Exchange. Total volume traded was 8 percent above the 100 day average. Futures dropped as much as 1.8 percent in New York.
Prices have climbed since OPEC agreed on September 28 to have a new production range of 32.5 million to 33 million barrels a day.
The International Energy Agency, IEA, earlier this week, said that the agreement of OPEC to curb output for the first time in eight years, has “effectively abandoned” the free market policy adopted in 2014.
The policy refers to an international market in which countries do not restrict imports from, or exports to, other countries.
In the agency October report, “while the new strategy could help erode the massive oil inventory overhang, there could be another surge in American output if prices rise to $60 a barrel.”
The IEA explained that “Libya and Nigeria have seen their production severely curtailed by war and sabotage, while sanctions on Iran that restricted its oil industry were lifted in January, allowing Tehran to steadily increase its production since the start of the year.
“All three nations increased their production in September and the group’s total output will remain around the current record levels until November.”
The agency stressed that, OPEC pumped a record 33.64 million barrels of crude a day in September, returning volumes from Libya, Nigeria and Iran which are set to be exempt from the Algiers deal suggest that “bigger cuts” would have to be made by others, notably Saudi Arabia, to meet the agreed target.
The IEA Executive Director, Dr Fatih Birol has said that energy efficiency is the one energy resource that all countries possess in abundance.
“I welcome the improvement in global energy efficiency, particularly at a time of lower energy prices. This is a sign that many governments push the energy efficiency policies, and it works.”
He maintained that, energy efficiency policies aim to deliver the maximum amount of social and economic benefit from the energy we use. Adding that, “For that reason, they are essential tools for government action that have a real impact on global energy demand. For instance, car fuel economy standards around the world saved 2.3 million barrels a day of oil last year or 2.5% of the global oil supply,” Birol stated.