Oil Traders Doubt OPEC Deal Will Rebalance Market

OPEC's deal to cut oil production is unlikely to result in a substantial reduction in supplies, some of the world's biggest oil trading companies said this week, meaning the market is unlikely to rebalance until well into 2017.

The price of crude oil has stabilized around $50 a barrel since the Organization of Petroleum Exporting Countries agreed the output deal on Sept. 28, Reuters reported.

But rising production from OPEC members Libya and Nigeria is casting doubts over whether the agreement can be effective.

"Clearly, they have put a floor on the market," Gunvor Chief Executive Torbjorn Tornqvist told the Reuters Commodities Summit. "But I don't think they can do any substantial cut. There are too many uncertain factors involved. These two countries can wipe out any other deal that has been agreed."

Any agreed reduction will not affect actual supplies until next year, Tornqvist said, because the OPEC meeting in Vienna on Nov. 30 to set supply policy will be too late to adjust cargo loading dates before 2017.

"Realistically, they can't do anything till January. We're going to have quite a lot of oil in the market until then. I don't have high expectations of sustained higher oil prices, certainly for the medium term," Tornqvist said.

Mercuria Chief Executive Marco Dunand said prices could fall to the low $40s if OPEC failed to agree anything at the November meeting but could rise to the high $50s and above should it remove as much as 1 million barrels a day from the market.

"Saudis wanted to take back control of the market. But whether they can convince OPEC and non-OPEC to manage inventories and price is still a big question," Dunand told the summit.

Glencore's head of oil, Alex Beard, was also skeptical OPEC's deal was a game changer. "We need to see the real deal in November rather than the talk of the idea of doing a deal," he said.

Gunvor's Tornqvist said the oil market was unlikely to rebalance until the middle or second half of 2017.

Vitol Chief Executive Ian Taylor also said that the oil price could reach the high $50s to low $60s if OPEC and other producers cut supplies by 1 million barrels per day.