Oil Prices Goes Deep, OPEC Russia Cuts Off
Some of the investors opted to cash out after Brent touched 16-month a high with optimism over this week's OPEC-Russia accord on cutting output giving way to questions on the "sticking point" of implementing the deal.
International Brent crude oil futures LCOc1 were trading at $53.66 per barrel at 0242 GMT, down 28 cents, or 0.52 percent, from their last close. U.S. West Texas Intermediate (WTI) futures CLc1 were at $50.92, down 14 cents, or 0.27 percent.
Analysts are now focusing their attention on implementation of the deal, the first agreement since 2001 by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to coordinate production cuts.
BMI Research said that compliance issues and a stronger than forecast revival from the U.S. shale sector represents the largest downside risk. It maintained its forecast for Brent crude at $55 a barrel in 2017 due to "ample stock levels and spare capacity within OPEC".
Simon Flowers, chief analyst at Wood Mackenzie said that this deal is significant. It sends a very strong message to the market and it should help the market find a balance.
Flowers forecasts Brent to average $55-$60 a barrel in 2017, but cautioned this would "depend on OPEC being very careful to meet the terms of the agreement.
Traders said that price developments in crude futures over the coming days should provide evidence of the extent of the market's optimism for the deal.
In the days prior to the Wednesday's deal, the market assigned a low probability that OPEC would come to a meaningful agreement because of the arguments between de facto leader Saudi Arabia and third-largest producer Iran.
But that had already changed after Russian President Vladmir Putin played a crucial role in helping the OPEC set aside differences to forge the cartel's first deal with non-OPEC Russia in 15 years.