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Oil Falls amid OPEC Production Cut Doubts

January 13, 2017 at 20:45 by Vladimir Vyun

Futures for crude oil fell today amid concerns that the Organization of Petroleum Exporting Countries will keep its promise to reduce output. Mohammed Barkindo, Secretary General of OPEC, was optimistic, saying in the interview to Reuters:

I remain confident… with the level of commitment and enthusiasm that I have seen among the 24 participating countries whom I am in regular contact with that this historic and landmark decision will be implemented fully.

Saudi Arabia, the biggest OPEC exporter, reported that it trimmed its production more than it had promised. Iran, the second biggest producer, also reduced its output. Despite that, there are doubts that other countries will fulfill their commitments, though compliance as low as 50% would be acceptable.

Barkindo also noted that the OPEC did not target a specific price for oil, rather focusing on excessive inventories:

We have no price objective.. our objective has been the high level of stocks that has built up in period 2014, 2015 and up to 2016.

The trade report from China was also a source of concerns. While the country demonstrated healthy 3.1% growth of imports in December from a year ago, exports slumped 6.1%. Economists said that it is a troubling sign for the economy, and considering that China is the second biggest oil consumer in the world, that also does not bode well for crude.

Contract for delivery of WTI crude oil in February lost 0.96% of its value to trade at $52.50 per barrel as of 20:32 GMT on NYMEX today. March futures for delivery of Brent crude declined 0.82% to $55.55 per barrel on ICE.

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