Oil futures dipped on Monday after Iraq requested to be exempt from production cuts, putting the fragile OPEC agreement in jeopardy. Prices tumbled, but a rally in U.S. shares and a decline in U.S. crude inventories limited the decline. Last month, OPEC announced a plan to reduce output in an effort to curb the oil oversupply and boost prices. OPEC has yet to reveal details on how it will reach its target. Member countries will meet on November 30 in Vienna.
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Jabar Ali al-Luaibi, Iraq’s oil minister, said on Sunday that the country wanted to remain exempt from the output cuts. Iraq, the second-largest producer in the world, said it needs more money to fight IS militants. The country produces about 4.77 million barrels of oil per day.
An Opteck CFDs (Contracts for Difference) report shows West Texas Intermediate for December down 1.3% (or 64 cents) to $50.21 a barrel. Brent crude was down 1%, or $51.26 per barrel.
Comments from Iran’s deputy oil minister, Amir Hossein Zamaninia, also helped curb losses on oil prices. Zamaninia said Tehran, Iran’s capital, would encourage OPEC members to join the output freeze. The oil minister added that $55-$60 a barrel was a fair price and would help bring stability back to the market.
Alexander Novak, Russia’s Energy Minister, said he was confident a deal would be reached to help support the market. Russia, the third-largest oil producer, is not a member of OPEC, but has been regularly holding talks with officials from member countries.
The U.S., the world’s top oil producer and country responsible for much of the oil supply glut, will not take part in any agreement with OPEC to freeze output.
OPEC members will meet on November 30 to discuss placing a production limit of 33 million barrels a day on the group.
Investors haven’t given the deal much credence, as OPEC members have a history of not complying to set quotas.
In addition to diminished hopes of an OPEC agreement, oil prices are also under pressure due to an uptick in the number of active oil rigs in the U.S. The oil rig count in the United States rose by 11 to 443 last week, according to Baker, an oil-field services company.
Analysts will be keeping a watchful eye on Venezuela where congress has staged a coup d’état. The country is largely dependent on oil and has been hit hard by the collapse in oil prices. Crude production in Venezuela dipped 11% in September to 2.3 million barrels. The dip is expected to cause the country’s economy to contract 10% in 2016.
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Source: Key Investing Forex