OPEC‘s efforts to stimulate flagging prices are likely to fail once again because of its limited influence on the market, Mouhammed Choukeir, chief investment officer at Kleinwort Hambros, told CNBC on Tuesday.
“Oil price has a life of its own…. You can see that since the beginning of the year clearly OPEC has tried its best to keep that oil price going higher and higher (but) it has failed to do so for a number of reasons,” Choukeir said.
The 14-member cartel and other oil exporting nations including Russia are trying to clear a global glut of crude oil by keeping 1.8 million barrels a day off the market through March. On Monday, the ministers did not discuss making deeper cuts, which some analysts have said are necessary, but OPEC members took other measures to shore up the deal.
The group urged major oil producers to boost compliance with output cuts in order to help rein in oversupply. OPEC kingpin Saudi Arabia pledged to cut oil exports at 6.6 million b/d in August, almost 1 million b/d below levels a year ago.
However, Choukeir argued the relentless rise in U.S. shale production was “offsetting everything OPEC is doing right now.”
“Oil is behaving in a very atypical way if you like and that’s largely because people are not convinced that OPEC is going to be able to comply and shale producers are going to continue producing,” he added.
Oil prices extended gains on Tuesday on the back of the OPEC meeting in the previous session, hovering slightly below the $50 per barrel threshold.
Brent crude traded at around $49.08 a barrel during mid-morning trading, up 0.97 percent, while U.S. crude traded at $46.83, up 1.06 percent.
— CNBC’s Tom DiChristopher contributed to this report.
OPEC's best efforts continue to fail because oil prices have 'a life of their own'