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

Gladys Abbott
November 15, 2018

Oil's tumbled more than 26% from a four-year high in October, hit by a U.S. move to allow some Iranian oil shipments to continue even after the imposition of sanctions on the Persian Gulf state, as well as rising American inventories and record output.

US West Texas Intermediate (WTI) crude oil futures were at $55.52 per barrel at 0732 GMT, down 17 cents, or 0.3 percent, from their last settlement.

With the United States now the world's top oil producer ahead of Saudi Arabia and Russian Federation, there are indications that traders will keep selling crude at lower prices as a result of oversupply.

But OPEC followed that up with a monthly report on the state of the oil market showing another cut to its demand forecasts - the fourth in a row.

Three sources familiar with the matter told Reuters on Wednesday that OPEC and its partners are discussing a proposal to cut oil output by up to 1.4 million bpd for 2019 to avert an oversupply that would weaken prices.

Both crude benchmarks have fallen more than 20% since peaking at four-year highs in early October.

The 14-member Opec expects oil supply from its rivals to outpace its own output next year. The oil cartel said it would start withholding crude in 2019 to tighten supply and prop up prices.

"Trump's message was meant to keep OPEC in check" after the group signaled they may agree to cut production, Makiko Tsugata, a senior analyst at Mizuho Securities Co., said by phone from Tokyo.

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Brent was trading at $65.54 a barrel, following its largest one-day loss since July 2018.

Why are oil prices falling?

The dollar also put pressure on oil, hovering near 16-month highs, making crude more expensive for importers using other currencies.

Non-OPEC supply will rise in 2019 by 2.23 million bpd, the Vienna-based organization said, 120,000 bpd more than previously thought and far more than the increase in world demand.

"The situation as it is now, at around $70 (per barrel), suits us completely", Putin said at a summit in Singapore.

Demand for its crude will be about 31.5 million bpd, which is 500,000 bpd less than its forecast two months ago and 1.4 million bpd below current output, Opec said this week.

Oil has retreated from a four-high reached in early October as fears of a supply glut deepened after the US gave some nations waivers from its sanctions to continue buying Iranian crude while American output and inventories climbed. The strength in the greenback - which reduces the appeal of commodities priced in the USA currency - may persist if the Federal Reserve raises interest rates again next month as expected, Mizuho's Tsugata said.

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