OPEC Gains Evaporate As Oil Plunges Toward $50 Again

Oil prices were on the decline again on Thursday, as yesterday’s Federal Reserve decision to boost interest rates continues to weigh on commodities.

In fact, nearly all of the OPEC production cap gains have now been wiped out. ZeroHedge adds some color to the situation:

As Libya restarts exports and The Fed sends the dollar soaring so WTI crude prices just broke back to a $49 handle for the first time since Dec 8th.

“The OPEC cuts are going to prevent some of the mega-glut,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland. “But Libya coming back is not going to help the supply imbalances. It’s going to take a little longer for the OPEC cuts to work. It’s relatively clear OPEC are not going to get to 32.5 million barrels a day in January.”

There’s also already some doubts about OPEC members actually following through with the planned production cuts. OilPrice.com has some detail:

Iraq’s state-owned oil marketing company SOMO plans to increase shipment of its Basra export grades to 3.53 million barrels per day in January, which would be a 7-percent increase from October volumes—an increase that is no small matter, as Basra grades sales account for around 85 percent of Iraqi crude exports.

While production and exports do not necessarily rise and fall at the same time due to storage and domestic consumption, Iraq’s consumption is only 15 percent of its oil output and relatively stable.

On the ETF side of things, the United States Oil Fund LP ETF (NYSE:USO) fell $0.11 (-1.02%) to $11.20 per share in Thursday morning trading. Year-to-date, the largest ETF tied to WTI crude oil prices has now gained just 1.82%.

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