NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved mixed in early regular trade Thursday morning after a statement from the Organization of Petroleum Exporting Countries announcing a deal to cut production in November failed to quell doubt that the agreement would be implemented.
OPEC said in a news release issued after markets closed late Wednesday that it was targeting a production rate in a 32.5 million bpd to 33.0 million bpd range that would cut output between 235,000 bpd and 735,000 bpd from the cartel's August output rate of 33.237 million bpd. The August production rate is based on secondary sources in OPEC's most recent monthly report.
The cartel said its first attempt to reduce output in eight years was driven by the need to accelerate rebalancing of the oil market, but their failure to provide clarifying details spurred skepticism about implementation and prompted profit-taking in oil futures overnight.
Analysts called the deal "an agreement to agree in two months," citing OPEC's decision to postpone allocation of supply quotas for individual OPEC member nations until the November biannual summit in Vienna.
Supply quotas were one of the contentious issues that scuttled the April OPEC meeting in Doha and nearly derailed Wednesday's informal talks in Algeria. Saudi Arabia was forced to make more concessions to get Iran to sign on to the agreement on Wednesday.
The Saudis initially offered to cut oil production to their January output rate of 10.23 million bpd from their stated 10.63 million bpd production rate in August in exchange for an Iranian output freeze at the current level of nearly 3.7 million bpd. The Iranians rejected the offer, saying they intended to raise their production to a previously announced target of 4.0 million bpd. The Saudis then sweetened the offer, saying that Iran, Nigeria and Libya would be allowed to produce at maximum levels that make sense.
"There are reasons to remain cautious, primarily because the devil is in the details," said Barclays Capital. "There are no established quotas from which to enforce a freeze or a cut. There is no enforcement mechanism in place to ensure that parties to a deal abide by its terms."
At 9:00 AM ET, NYMEX November West Texas Intermediate crude futures was near unchanged, down 5cts to $47.00 bbl, off a $47.47 three-week spot high. The ICE November Brent futures contract was down 25cts to $48.44 bbl, off a $49.09 three-week high.
In products trade, the NYMEX October ULSD futures contract was little changed at $1.4906 gallon, and has since advanced to a $1.5038 one-month spot high. The November contract was also little changed at $1.4962.
NYMEX October RBOB futures fell 1.51cts to $1.4626 gallon, holding below Wednesday's one-month spot high of $1.4867 posted, while the November contract was down 1.07cts to $1.4278.
The October product futures contracts expire Friday afternoon.
"Essentially, this agreement is, in our view, no more than yet another last ditch effort to kick the can further down the road and preclude market participants from positioning short during the coming shoulder season," Barclays added. "This action will help OPEC keep those shorts on the sidelines until November, when winter-related demand will return and the prospect of market balancing is in further focus."
Domestically, the Energy Information Administration showed stocks of crude and distillate fuels declined by 1.9 million bpd each during the week-ended Sept. 23, and gasoline supply increased 2.0 million bbl. Overall demand for oil products fell 205,000 bpd to 19.226 million bpd, while crude inputs at U.S. refineries tumbled 253,000 bpd to 16.334 million bpd.
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