Oil down 2 percent after Trump urges OPEC not to cut supply

14 November, 2018, 16:24 | Author: Mary Valdez
  • Representatives from here major oil producers met in Abu Dhabi at the weekend

The oversupply issue is the main focus in oil right now and Iran's sanctions failed to sap out production as anticipated, no thanks to U.S. waivers of course.

During its last meeting, the Organisation of Petroleum Exporting Countries (OPEC) and its allies led by Russian Federation acknowledged that an oversupply of oil in the market is imminent in 2019.

Global benchmark Brent crude oil futures had yet to trade.

In its monthly report, OPEC said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive forecast cut.

In this context, then, it is no surprise OPEC officials, notably Saudi Arabia's Khalid al-Falih have started to talk about production cuts again for fear of another glut like the one that dragged prices below US$30 a barrel four years ago.

Oil's slide accelerated on Tuesday, with USA futures dropping to lows not seen in 11 months due to ongoing worries about weakening global demand, oversupply and sell offs across other asset classes, including equities. Hedge funds and other money managers have reduced their long position in oil contracts to their lowest since August of 2017 last week.

Brent Crude has now fallen over 25% since hitting a four-year high in early October, while United States oil has lost 28% since its October peak.

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Oil markets remained on a weak footing on Wednesday after a 7 percent slump the previous session, with surging supply and expectations of faltering demand pressuring crude prices.

"The market now increasingly looks concerned about the prospect of too much supply", said Norbert Ruecker, head of macro and commodity research at Swiss bank Julius Baer.

Saudi Arabia, a prominent member of the oil cartel, said it would cut exports by as much as 500,000 barrels per day (bpd) in November and December to curb oversupply.

Oil prices have fallen sharply to levels not seen for nearly a year as traders see a return of a glut in supplies at a time of falling demand. Russian oil minister Alexander Novak said his country was open to cuts, at a meeting of oil producers in Abu Dhabi.

Merrill Lynch says US crude production will break through 12 million bpd in 2019, supporting oil exports to the rest of the world. Kazakhstan said on Tuesday its oil output rose 4.8 per cent to 74.5 million tonnes in the first 10 months of 2018, equivalent to 1.82 million bpd.

Trump posted a tweet on Monday meant to put pressure on OPEC, calling for no supply cuts to prop up prices.

Most analysts expect USA output to climb above 12 million bpd within the first half of 2019.

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