Following a rally on Monday, crude oil prices are under pressure in early Asian trade on Tuesday, supported by a shaky prospect of a production cut deal. Crude oil prices fell in early Asian trade after the news that OPEC experts concluded their meeting yesterday without agreeing on actual details of a production cut quotas.
International Brent crude oil declined almost 0.50% to around $47.66 per barrel, while U.S. West Texas Intermediate crude dipped below $46.50 in early Asian trade on Tuesday.
However, on the positive side, Iraq and Iran’s consent has enhanced the prospects for the production deal. Recently, Iraq’s oil minister said they would collaborate with other OPEC members to arrive at an accord “suitable to all.”
Iraq is only looking to freeze their production around 4.56 million barrels instead of making a cut of 3% to 5% that the group has proposed for each member, excluding Nigeria and Libya.
On the other hand, Iran also seeks to freeze their oil production at pre-sanction levels only for a specific time period. Iran’s current production of around 3.8 million barrels a day is very close to its pre-sanction level of 4.2 million barrels a day.
Russian and Iranian Presidents decided in a phone call on Monday to cooperate with OPEC members to stabilize crude oil market. However, traders’ doubts over the production deal are increasing, as non-OPEC Russia has also expressed their intention for freezing their output around 11.2 million barrels a day, when market participants were expecting a cut in Russian supplies.
Russia says that a freeze is fundamentally a cut as the country planned to enhance output in fiscal 2017.
Crude oil prices are likely to remain volatile during Tuesday trade amid speculations related to the OPEC production deal. In addition, the threat of U.S. production could also hinder crude oil price movement in the coming days, even if OPEC producers agree to make a combined cut on Wednesday.