Oil prices fall as Trump counters OPEC plan to cut supply

Irving Hamilton
November 14, 2018

This put the Middle Eastern country at odds with Russian Federation, which said it was no clear whether the market would be oversupplied next year, with market analysts predicting the country's oil producing companies likely to BOOST proaction by 300,000 barrels per day.

"We're kind of back to square one: It must feel like November 2016 to them, a lot", said John Kilduff, a partner at Again Capital Management in NY, referring to the time period when OPEC and its allies agreed to initiate production cuts. The producers need prices that are high enough to balance their budgets and low enough to stimulate demand and shield themselves from attacks from the White House, all while they contend with wild swings in supply as sanctions hit OPEC member Iran.

Members of the Organization of Petroleum Exporting Countries (OPEC) and its allies could reduce supply further next year if needed, he added.

Oil prices have staged a recovery, climbing above $70 a barrel after Saudi Arabia said the world's major crude producers agreed that supply needs to be significantly cut next year.

Brent jumped about 2 per cent following the comments made by Mr Al Falih to $71.59 barrel around 12:00pm Abu Dhabi time on Monday. Barron's Al Root noted that changes in output from the particular world region can have an outsized impact on commodity prices due to the major difference in what it costs to produce oil in the kingdom versus other places in the world. The biggest increases were from the United Arab Emirates and Saudi Arabia, while Iranian supply continued to tumble.

The drop in prices came after the U.S. said it would allow eight countries, including India, to continue importing crude from Iran.

That came after reports that Saudi Arabia was considering a production cut at the December OPEC meeting, on increased alarm that supply has started to outpace consumption. That appeared to be a veiled reference to Trump. Now "we're seeing the pendulum swing violently to the other side", he added.

A decision is expected only when the OPEC and non-OPEC ministers meet in Vienna on December 5 to assess the global energy market.

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"But it's early to talk about this now, we need to look at this question very carefully".

USA energy firms last week added 12 oil rigs in the week to November 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday. However, he stressed that more study needed to be done. "We're seeing some signs of this coming out of the U.S. We have not seen the signs globally, nor can we predict that they will persist into 2019".

A gallon of regular gasoline in the US on average now sells for $2.69, down from $2.90 a month ago, according to AAA.

Oil collapsed into a bear market in little more than a month, and pressure is mounting on the OPEC+ group to act sooner than their policy meeting in December. Oman, a sultanate on the eastern edge of the Arabian Peninsula, maintains close diplomatic ties to Iran and often serves as an interlocutor between Western powers and Tehran. The rupiah's plunge to a 20-year low last month is spurring Southeast Asia's biggest economy to push forward with a plan to reduce pain from a growing dependence on imported crude oil.

US benchmark West Texas Intermediate crude CLc1 fell 26 cents a barrel to settle at $59.93.

"The odds of a cut next month seem fairly high and that it will likely be in the 1 million barrels per day range", it says.

"However, producers are concerned that the latest selling frenzy could see Brent oil reach $60 or below".

"Make no mistake: Hydrocarbons will continue to play an absolutely essential part of a diversified energy mix", al-Jaber said.

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