Crude Oil on the defensive after the OPEC Decision

The global crude oil markets remained on the defensive after shedding nearly five percent during North American trade hours. OPEC and key non-member oil producing nations, extended output cuts but disappointed on longer or larger supply curbs.

At Thursday’s meeting in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers, like Russia, agreed to extend the current production cut scheme, of nearly 1.8 million barrels per day, until the end of the first quarter of 2018. The initial agreement, agreed upon in November of last year, would have expired this June.

After the announcement, Crude oil plunged 5 percent. The black gold held onto its losses early on Friday. As of 1:30 am GMT, the global benchmark Brent crude futures were trading at $51.47 per barrel. This was up 1 cent from their last close. US West Texas Intermediate (WTI) crude futures was back below the key pivot at $50. Fetching just 48.88. This was down 2 cents from their previous close during the US trade hours.

Oil Investors expected deeper Cuts

Crude investors had been expecting more from OPEC yesterday. They wanted to see either deeper supply curbs, something longer or more countries participating.

This production cut scheme should result in a drawdown of bloated fuel inventories. However, OPEC has a current goal towards bringing inventories down to their five-year average. This will not be reached within the time frame of this current production cut. We are looking at a rebalancing of no earlier than late 2018.