Oil prices fall after Trump North Korea threats, IEA report says OPEC compliance weak

Oil prices fell on Friday on market insecurity over President Trump’s war of words with North Korea and a report from the IEA showing poor compliance with the OPEC pact. QEP Resources photo.

Oil prices impacted by Trump sabre-rattling

Oil prices fell in trading on Friday after the International Energy Agency said weak compliance among participants in the OPEC supply cut pact was slowing the rebalancing of the oil market.

Brent crude fell to $51.68/barrel by 12:20 p.m. EDT and US WTI was down 21 cents to $48.38/barrel.

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Oil reached 2 1/2 month highs on Thursday, but closed down about 1.5 per cent amid oversupply concerns.

“There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said in its monthly report.

According to the IEA, compliance with the OPEC pact is now at 75 per cent, the lowest since the agreement came into effect on Jan.1.  The IEA noted weak compliance by Algeria, Iraq and the United Arab Emirates.

As well, significantly higher production from Libya added to OPEC’s output.

“Crude oil prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories,” Reuters reports ANZ bank said in a note. “Supply-side issues also weighed on prices.”

According to the Saudi-owned Al Sharq Al Awsat newspaper, Saudi Arabia’s Energy Minister Khalid al-Falih said the kingdom does not rule out additional production cuts.

The IEA revised its historic demand data for 2015-2016 downward.  A lower demand base in 2017-2018 along with unchanged high supply could result in lower-than-anticipated stock draws.

The war of words between US President Donald Trump and North Korea has also left the market in a jittery mood.

“I think the issue that is affecting the market is the general risk sentiment of sabre-rattling between Washington and Pyongyang,” Michael McCarthy, chief market strategist at CMC Markets told Reuters.