Oil falls to $55 after Russian Federation delays production-cut decision

20 November, 2018, 04:59 | Author: Regina Silva
  • Pavel Ignatov  Adobe Stock

The Organisation of the Petroleum Exporting Countries is pushing for the producer group and allies to cut 1 million to 1.4 million barrels per day of supply to adjust for a slowdown in demand growth and prevent oversupply.

Crude oil prices started the week on a positive note and extended its recovery rally before reversing direction in the second half of the day.

Futures in NY rose as much as 1.5 percent after a 6.2 percent slump last week.

Oil futures fell about 1 percent on Monday amid global oversupply worries, but losses were muted as investors eyed potential sanctions on Iran from the European Union, a possible production cut from OPEC and slightly bullish storage drawdown in U.S. crude stocks.

Front-month Brent crude oil futures, the worldwide benchmark for oil prices, were trading at $67.29 per barrel at 0045 GMT, up 53 cents, or 0.8 percent, from their last close.

"Oil prices continued to recover.(as) the market will be watching closely for the possible impact of a (supply) cut." said Sukrit Vijayakar, director of Indian energy consultancy Trifecta.

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Oil fell on Monday, surrendering earlier gains as investors weighed up the effectiveness of a potential cut in supply from OPEC and possibly other exporters in the face of rapidly rising global output.

Presumably, prices at that level would be too low even for USA president Donald Trump, who has spent the better part of the year pressuring OPEC to produce more and lower prices from earlier highs of $80; this week the brash billionaire met with Russian president Vladimir Putin and discussed the issue, with the latter subsequently telling media that "where [the market] is now, where it was recently, anything around $70 suits us completely".

Louise Yamada, founder and manager at Technical Research Advisors, says data suggests a deeper plunge into bear territory: she told CNBC, "We've seen the completion of the target from a head and shoulders bottom back in 2015-2016: it went directly up to $78-$79 [per barrel]. It is not unreasonable to anticipate stable prices until then", PVM Oil Associates strategist Tamas Varga said.

With OPEC ministers meeting on December 6 in Vienna to decide on production policy for the next six months as crude inventories around the world steadily build, the question becomes, can the announcement of a cutback from the cartel produce a swift price rebound?

West Texas Intermediate for December delivery, which expires on Monday, added 18 cents to $56.64 a barrel on the New York Mercantile Exchange at 11:23 in London.

Meanwhile, drillers in the U.S. added two more working rigs last week, bringing the total to 888, the highest level since March 2015, according to Baker Hughes data. Money managers have cut their net bullish Brent and WTI oil bets to the lowest in 17 months, weekly ICE Futures Europe and CFTC futures and options data on four contracts show. The Cboe/Nymex Oil Volatility Index fell more than 3 percent on Friday, declining for a third day.

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