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Oil prices fall as traders take profits after OPEC inspired rally
Published Dec 06, 2016 04:16AM ET
© Reuters. Oil prices fall amid profit taking after OPEC inspired rally
Investing.com - Oil prices fell on Tuesday as traders took profits in the wake of a powerful rally that propelled prices to 16-month highs after the Organization of the Petroleum Exporting Countries agreement to cut output for the first time in eight years.
U.S. crude oil was trading at $51.35 a barrel at 09:16 GMT, down 43 cents or 0.83% from its last close. It hit an intra-day peak of $52.42 on Monday, the highest since July 2015.
Global benchmark Brent futures slid 27 cents or 0.49% to $54.67 a barrel. Brent hit highs of $55.33 on Monday, also the highest since July 2015.
U.S. crude rallied 14% last week, the largest weekly percentage gain since early 2011 and Brent rose nearly 15% for the week after OPEC agreed on its first coordinated production cut since 2008.
The deal will see the producer cartel cut output by 1.2 million barrels per day and will take effect from January 2017.
The agreement also included coordinated action with non-OPEC members, including Russia, who are expected to decrease production by 600,000 barrels a day.
The impact of the output cut will be reassessed after six months with an option to extend the accord for an additional six months.
OPEC reached the agreement in a bid to reduce massive global oversupply that has pressured oil prices lower since mid-2014.
Investors were beginning to turn their attention towards a meeting of OPEC and non-OPEC members in Vienna on December 10 to finalize the details of the agreement.
Russia has said it will cut production by 300,000 barrels a day, but said it would do so at November levels.
On Friday Russia reported that its daily oil production averaged 11.21 million bpd in November, the highest in nearly 30 years.
Data on Tuesday showed that OPEC's oil output hit another record high in November, rising to 34.19 million bpd from 33.82 million bpd in October.
The increase in output triggered fears that the global supply glut could persist well into 2017.
Analysts have warned that the cuts are likely to cause other producers, especially U.S. shale drillers, to increase output.
Analysts are also doubtful over how the agreement will be enforced, as OPEC has no authority to make its members comply.
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