Oil traders punish OPEC for promising too much

VIENNA: As OPEC's latest meeting wrapped up in Vienna on Thursday night, ministers congratulated each other on its rare spirit of amity and consensus. The talks were, without a doubt, a success.But two hours later, one veteran delegate was staring in despair at the numbers flashing red on his smartphone showing crude down some 5 percent to $51 a barrel.

"That is a disaster," he said. While OPEC has worked hard in recent years on improving communication to ensure the right message is delivered to financial markets, Thursday's experience showed the 14-member group and its non-OPEC allies still have a long way to go.

The problem was not what was delivered, but what appeared to have been promised beforehand, industry analysts said.

OPEC agreed on Thursday to extend its existing production cuts by nine months - more than the initially suggested six months - in tandem with non-OPEC producers, including Russia.

But hints from the group that it could deepen supply cuts, extend them by as long as 12 months, curtail exports and tell the market how exactly it would terminate supply curbs in 2018 had raised market expectations much higher.

"OPEC oversold the meeting to the market way too early," Amrita Sen, from the consultancy Energy Aspects, told Reuters in Vienna.

The market reaction was all the more disappointing given that from OPEC's perspective, the meeting went very well.

"I have been in OPEC close to 20 years. It's the first time that I witness 100 percent compliance (with cuts) from OPEC and close to 100 percent from non-OPEC," Iranian Oil Minister Bijan Zanganeh told Reuters afterward.

OPEC's No.3 producer, Iran has repeatedly clashed in past meetings with OPEC's de-facto leader, its political arch-rival Saudi Arabia.

Russia, which effectively is fighting a proxy war with Saudi Arabia in Syria, said on Thursday its energy cooperation with Riyadh would last well into the future.

In its statement, OPEC said it could extend curbs further or cut more. Normally, all this would be more than enough to trigger a bull rally. "It's strange. I don't know why (the market crashed)" Zanganeh said.