Oil Prices Drop By 1.3 Percent in Nigeria

Oil prices dropped by 1.3 percent yesterday after a short-lived boost from Saudi Arabia voicing confidence that a major international deal to cut production has started to drain the market of excess supply. On the New York Mercantile Exchange, crude futures for delivery in March traded at $52.54 a barrel, down 68 cents, or 1.3%, in the Globex electronic session, while March Brent fell 56 cents, or 1%, to $54.93 a barrel.

Oil prices had gained traction over the weekend after Saudi Arabia's energy minister, Khalid al-Falih, said the 20 nations that have agreed to rein in output are showing "very good compliance."

According to officials of the Organization of the Petroleum Exporting Countries, OPEC and 11 non-OPEC producers have already cut 1.5 million barrels a day from the global oil market -- over 80 percent of the amount pledged.

While the cuts apparently have been implemented, the reduction had been "largely priced in," said Commerzbank analysts in a note yesterday, as they reflected on oil starting the week in the red.

The latest figure only reflects the amount cut by participating nations and doesn't count OPEC members who didn't join the deal. Libya, for example, was exempt because its oil industry has been marred by months-long civil unrest. The state-owned oil company recently reported that production has risen above 700,000-barrels a day for the first time in three years.

Official OPEC January production data is expected to be released in mid-February. Other analysts said that if producers continue to adhere to the production limit, the oil market may encounter a supply shortage later this year, pushing Brent prices to the $60 a barrel range, despite expected slower growth in global demand. 

The world's energy watchdog, the International Energy Agency, now forecasts growth in global oil demand to ease to 1.3 million barrels a day this year, from 1.5 million barrels a day in 2016.