(New York) West Texas Intermediate (WTI), the American benchmark variety, ended Tuesday at its lowest closing level in five months, in a market that doubts the new commitments of the OPEC cartel and is worried about the request.
A barrel of WTI for delivery in January ended at $72.32, down 0.98%.
Earlier, it fell to $72.17, a breath away from the low reached in mid-November ($72.16), the lowest price in session since early July.
A barrel of Brent from the North Sea, for delivery in February, fell 1.06% to $77.20.
This is the fourth negative session in a row for black gold since the announcements by the Organization of the Petroleum Exporting Countries (OPEC) and its allies in the OPEC agreement. WTI has lost more than 7% in less than a week.
“Operators really weren’t impressed” by OPEC’s communication, Oanda’s Craig Erlam said in a note, despite promising additional production cuts of 900,000 barrels per day, in net.
“Since these are “voluntary” reductions, there are doubts about the degree to which they will be implemented,” explains Carsten Fritsch of Commerzbank in a note.
“This is particularly true for Iraq and the United Arab Emirates, which were already producing more than their quotas,” the analyst continued.
“We had the announcement from OPEC, and I don’t think they’re going to communicate [collectively] again by the end of the year,” says Andy Lipow, of Lipow Oil Associates, the market n therefore not having to wait for further help on this front, according to him.
“In the short term, OPEC has lost some of its power to set prices, because the market completely ignored their meeting” last Thursday, says the analyst.
A shift in the balance of power between OPEC and the rest of the major producing countries, in particular the United States, whose production is currently at a record level, while additional flows have come from Brazil and Guyana.
In addition, “the market is no longer growing due to supply disruptions due to the war between the [Palestinian Islamist movement] Hamas and Israel,” he estimated, which deprives it of another potential catalyst.
“So the direction that prices take will depend on market expectations of demand, and whether growth in needs will materialize,” warns Mr. Lipow.
