Oil Crashes After Trump Says Prices Should Be 'Much Lower'

Daniel Fowler
November 15, 2018

Oil prices should be much lower based on supply! Weak oil demand outlook by OPEC and worries about oversupply and US-China trade war also weighed on oil prices. The recovery in oil prices that followed the 2017 OPEC-led supply cut is still prompting more growth in rival production.

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after USA sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday. The IEA expects inventories in industrialized nations to jump by 2 million barrels a day in the first half of next year if current output is maintained.

Global benchmark Brent crude oil futures were up 51 cents at $65.08 per barrel by 2:29 p.m ET. US crude had declined for a record 12 consecutive sessions to the lowest since November 2017.

"OPEC lowered its demand forecast, and that gives them cover for cutting production", said Phil Flynn, analyst at Price Futures Group in Chicago.

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

The IEA left its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million barrels per day (bpd) and 1.4 million bpd, respectively, but cut its forecast for non-OECD demand growth, the engine of expansion in world oil consumption.

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U.S. crude oil output from its seven major shale basins is expected to hit a record 7.94 million barrels per day (bpd) in December, the U.S. Department of Energy's Energy Information Administration said on Tuesday.

Trump on Monday said he hoped OPEC will not cut production, making it clear he wants oil prices to fall.

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That surge in onshore output has helped overall USA crude production hit a record 11.6 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Riyadh indicated on Monday it was on course to ignore the United States president's wishes at OPEC's next meeting due in December because it saw a need to reduce OPEC output by a collective one million barrels per day during 2019.

Traders said the selling was an extension of Monday's, which was triggered after US President Donald Trump posted a tweet meant to put pressure on Opec (Organization of the Petroleum Exporting Countries) not to cut supply to prop up prices.

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