Oil prices climb amid expected OPEC cut, but markets remain wary

Daniel Fowler
November 20, 2018

"Meanwhile, producers are considering supply reductions in response and we expect Opec to agree to a supply cut at its next official meeting on 6 December", BNP said.

But OPEC could prove to be the spoilsport as it works on a production cut deal to avoid a looming supply glut, especially with USA shale production rising to record levels.

The market is struggling to find firm footing after a rout that has seen prices fall more than $20 a barrel since early October on global oversupply fears.

Analysts said that oil prices continued to recover as the market watches closely for the possible impact of a supply cut.

Front-month Brent crude oil futures were at $66.75 a barrel, down 4 cents from their last close. "It is not unreasonable to anticipate stable prices until then", PVM Oil Associates strategist Tamas Varga said.

India in Australia ready to beat a home team in turmoil
Rohit Sharma during a net session in Brisbane , Australia. "There is a real good feeling in the group for all three formats". While a regular in India's limited-overs format, Rohit Sharma is yet to quite cement his place in India's Test squad.

The current production cut agreement, in force from January 2017, has removed a combined 1.8 million barrels of crude per day from the market to help the market re-balancing. Trade tensions between the world's biggest economies escalated over the weekend with U.S. Vice President Mike Pence's attack on China, adding to worries supply may overtake demand.

US West Texas Intermediate (WTI) crude futures, were up 71 cents, or 1.3 percent, at $57.17 per barrel. Total volume traded was about 5 percent below the 100-day average.

Crude oil futures for January, the most active contract, ended up $0.52, or 0.9%, at $57.20 a barrel. "Oil market had a lot of noise thrown at it overnight, IEA notwithstanding, but still bounced back, suggesting details of December 6 meeting should provide a stable platform for prices over the near term". Russian President Vladimir Putin said last week that a price around $70 "suits us completely".

US energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, a weekly report by energy services firm Baker Hughes said on Friday. USA crude production has been rising, hitting a record in the week ended November 9, according to government data.

Fisher went on to say that the worst of the market rout was due to momentum trading and hedge funds dumping crude futures in order to buy natural gas, which has surged over the last month: "When that trade is finally unwound and when. you start seeing. some more negative stats with no negative price action that's. when you'd want to buy the dip in crude". He said the market needs to note that "spare capacity in Saudi Arabia is very thin, therefore cutting the production significantly today by key oil producers may have some negative implications for the market". The Cboe/Nymex Oil Volatility Index fell more than 3 percent on Friday, declining for a third day.

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