SINGAPORE/LONDON (Reuters) – Oil fell one percent on Monday despite confirmation leading exporter Saudi Arabia was curbing November supplies after an OPEC agreement to cut output.
Traders said it would take more to convince investors all in OPEC were as ready as Riyadh to forego oil revenues.
U.S. crude was down 63 cents at $58.70 a barrel by 0811 GMT. The front month contract lost $1.68, more than 2 percent, on Friday to hit its lowest level this year.
London Brent crude was 84 cents down at $58.84.
Saudi Arabia told Japanese, Chinese and South Korean refiners it would cut their November crude sales by up to 8 percent, industry sources told Reuters on Monday.
Asian customers take nearly 50 percent of Saudi oil exports.
Global oil majors learned two weeks ago that they would see a reduction in their November volumes.
OPEC agreed on Friday to remove 1.2 million barrels per day (bpd) of oil from oversupplied markets.
“Saudi Oil Minister Naimi does what he says he will do, and past data shows the market will reverse direction whenever he makes such commitments,” said Keith Sano, the manager at Sumitomo Corp’s commodity business department in Tokyo.
“Most likely, OPEC will cut its output again in December.”
Saudi Arabia is expected to shoulder 32 percent of the OPEC cut, or 380,000 bpd. It typically applies cuts evenly to Asian customers — an 8 percent cut to the region would remove some 280,000 bpd from the market.
The OPEC cut was its deepest since January 2002 and equal to about 4.3 percent of September supply, but has failed to halt oil’s slide from its July peak of $78.40.
Some OPEC ministers said another cut of 500,000 bpd could follow when the cartel meets next in Nigeria in December. They said they were concerned about high fuel stocks in consumer countries and a projected drop in demand for OPEC oil in 2007.
But OPEC ministers’ lack of unity on how to implement the cuts before the hastily arranged talks has left uncertainty in traders’ minds on how the group will implement the curbs.
To sidestep the issue of quotas and market share that analysts said had begun to cost OPEC credibility, the organization published only a list of individual cutbacks but left formal quotas unchanged.
Some analysts said relatively high prices — still three times the level in January 2002 — meant there was less pressure on OPEC members to play a team game.
“The market is highly skeptical that OPEC will deliver the promised cuts in crude oil production,” said Tobin Gorey of the Commonwealth Bank of Australia. “OPEC’s discipline in sticking to output targets has been lax, at best, in the past,” he added.
High OPEC output has left inventory levels bulging ahead of peak winter demand. U.S. crude stocks have risen to 23.1 million barrels above the 2005 period, while distillate stocks — including heating oil — fell in government data last week but remained 18.8 million above the same time last year.
Traders are still keeping an eye on potential supply disruptions in producer countries that had helped drive gains.
In OPEC member Nigeria, 7 foreign oil workers who were being held hostage have been released, police said on Saturday. A fifth of Nigeria’s production capacity has been shut by attacks.
Iran said on Sunday the West’s “carrot and stick” method for getting it to halt sensitive nuclear fuel work was doomed. The U.S. and European countries back U.N. sanctions against Tehran.