Oil down as OPEC compliance to cuts falters during September

Oil Prices continue to retreat during the last few days, after reports revealed a declining OPEC compliance to production cuts. Last week, Reuters Agency reported that production output increased during September above the group’s production target rising to 32.86 million barrels per day.

Prices probably suffered from the report, unless OPEC approaches the original production target of its 14 members of just below 32 million barrels per day, rebalancing will suffer a major and possibly prolonged setback.

However, Inventories are still a bit above the five-year average, but the surplus has narrowed substantially. Soon storage levels could dip below that average level.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $50 per barrel at 0417 GMT, down 42 cents, or 0.8 percent, from their last close. They fell below $50 per barrel earlier in the session.

Brent crude futures, the international benchmark for oil prices, were down 38 cents, or 0.7 percent, at $55.62 a barrel.

The rebalancing has been resultant of the OPEC compliance to the agreed upon cuts, compliance for cuts during the month of August was more than 100 percent. However, recent data showed that the compliance during the month of September, fellow below the said targets.

Barring any price movement upward has been contained by the rising Shale Production in US which is not participating in the cuts. US production hit 9.55 million barrels per day in late September, its highest output since July, 2017.

Due largely to rising U.S. output, analysts are of the opinion that,"an extension of output curbs beyond March (2018) will be needed to ensure continued support for the oil market"