Oil prices slide as Trump urges OPEC not to cut supply

Daniel Fowler
December 6, 2018

Oil prices have crashed as Saudi Arabia, Russia and the UAE have raised output since June after Trump called for higher production to compensate for lower exports from Iran, OPEC's third-largest producer.

Iran is now subject to US sanctions and as such won't participate in any curbs, the country's OPEC governor Hossein Kazempour Ardebili said this week.

Saudi Arabia is hoping Russian Federation, one of OPEC's most important allies, cuts down its production by about 250,000 barrels per day, but Russian Federation wants to limit its cut to half that amount. The United States is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry.

The Vienna meeting also comes only days after Qatar announced it would be the first country from the Middle East to withdraw from OPEC, saying it wanted to focus more on gas production.

His Iraqi counterpart, Thamir Ghadhban, said: "I am optimistic that the agreement will stabilize the market, will stop the slide in the price (of oil)".

International Brent crude oil futures LCOc1 were at 61.04 dollars per barrel at 0531 GMT, down 52 cents, or 0.8 per cent from their last close.

Saudi Arabia's Energy Minister Khalid Al-Falih said on Thursday reducing production by one million barrels per day would be enough for OPEC Plus.

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The last time the OPEC+ group agreed to curtail output, in late 2016, it settled on a combined 1.8 million-barrel-a-day reduction. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd.

However, many have accused the US President of tricking Saudi Arabia.

In a sign of easing tensions between the world's two biggest economies, Chinese oil trader Unipec plans to resume United States crude shipments to China by March after the Xi-Trump deal at the G20 meeting reduced the risk of tariffs being imposed on these imports, people with knowledge of the matter said. This comes as US crude oil is now trading at $53 a barrel, which is down from a four-year high.

The US president tweeted on Wednesday: "Hopefully OPEC will be keeping oil flows as is, not restricted". Iraqi Oil Minister Thamer Ghadhban said Iraq as OPEC's second-largest producer would support and join a cut.

Ross explained that "Trump is anxious about the Fed and inflation".

Members have hinted they plan to cut output by 1.3 million barrels a day, which President Trump fears would cause fuel prices to rise.

If the 20 or so OPEC members and other nations at the Vienna talks - which account for more than half of the world's oil - continue to pump at current record levels, they risk seeing prices continue to tumble.

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