Oil plunged to the lowest in almost 2 months in Friday NY session amid fear and uncertainty on OPEC output after a volatile week driven by uncertainty about the groups intentions and the surprise US election of President elect Donald Trump.
Oil has dropped about 15% from its October high on growing doubts that OPEC will be able to finalize the Algiers accord at its Nov 30th meeting amid a refusal to cut output from almost third of its members. OPEC members are confessing to large increase in production that might make Algiers deal impossibility.
Futures fell as much as 3.7% on Friday. Although Organization of petroleum exporting countries (OPEC) unite to cut production, countries like Iran and Iraq reportedly raised output last month, while Saudi Arabia pumped near record levels.
OPEC’s monthly report contains two sets of production data: one submitted by individual members known as” direct communication” and another compiled from external sources such as news agencies and intergovernmental institutions referred to as “secondary sources”
Iran, Iraq and Venezuela have said these externally compiled numbers, which will be used when allocating production cuts, underestimate their output and that their own government data should be used instead. OPEC data shows, Iran’s reported production increase of 210,000 bopd in October exceeds the combined gains of previous 5 months. Secondary sources showed a more modest addition of 27,500 bopd for October.
The secondary sources show that OPEC output increase as Nigeria and Libya recovered output lost to sabotage, militant attacks and political conflict. That means the group would need to further cut to comply with the range it set out in Algiers. OPEC has sought help in lowering output from non-member such as Russia, which has indicated it may at least freeze if not cut supplies.
While investors took comfort from trump’s conciliatory acceptance speech last Wednesday, an adviser from International Energy agency (IEA), said he is waiting to see whether President elect Donald Trump’s rhetoric on middle east hardens into action before revising his market forecast.