Oil slips further on disappointing OPEC meeting outcome

The oil price rallied this morning on the expectation of an extension of the deal to limit output by nine months or more.

At Thursday's meeting in Vienna, Opec and some non-Opec producers agreed to extend a pledge to cut about 1.8-million barrels per day (bpd) until the end of the first quarter of 2018.

Saudi Oil Minister Khalid Al-Falih, who presided over the meeting, said he expected that the extension should reduce high crude inventories to a level corresponding to "the five-year average by the end of the year".

"There are number of oil market variables which could play out over the course of the second half of the year".

Early indications from US futures prices suggest a similar pullback on Wall Street Friday, with modest declines priced into both the Dow Jones Industrial Average and the broader S&P 500, the latter of which printed its second-consecutive all-time high Thursday when it closed at 2,415.07 points.

The alliance between OPEC and non-OPEC producers is strong, but not strong enough to derail production momentum from North America, analysis finds. While yesterday the market sent prices almost 5 percent lower. "The days of OPEC using oil supplies and prices as a political weapon are gone".

The upshot is that the price of oil - and derived products like fuel - is unlikely to increase much in coming months.

But David Elmes, professor at Warwick Business School and head of the Global Energy Research Network, thinks that the future of energy will not be in the production of more oil, but rather on the consumer side. A continuation of the earlier level of cuts was perhaps the minimum they were expecting. Backwardation - when near-term crude prices are higher than those for later months - will be needed for the cuts to shrink the glut, and prevent an increase in United States shale production, the bank said.

The latest weekly US oil rig data is due at 1:00 p.m. EDT from energy company Baker Hughes.

The cuts are likely to be shared again by a dozen non-members led by top oil producer Russian Federation, which reduced output in tandem with OPEC from January.

Major oil producers led by OPEC have greed to extend their crude output cuts through March of next year, but that could feed a glut of global supplies once the deal is done.

Crude prices tumbled 5 percent following the decision on Thursday and extended losses on Friday.

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