Oil down 2 percent after Trump urges OPEC not to cut supply

Gladys Abbott
November 14, 2018

WTI (oil futures on NYMEX) caught a fresh bid-wave and broke the downside consolidation phase, bouncing almost $ 1 on the latest reports that the OPEC and its allies are reportedly discussing oil supply cut of 1.4 million barrel per day (bpd). The president even took credit for a big slide-prices are down about 25% since October.

Following the report that OPEC and allies have been discussing a 1.4-million-bpd cut, oil prices were tentatively rising early on Wednesday, after a 7-percent tumble to one-year lows on Tuesday. As of last week, hedge funds and other money managers had reduced their long position in oil contracts to their lowest since August 2017.

Oil prices, which spiked in October in the run-up to the reimposition of United States sanctions on Iran's oil industry on November 5, fell after the United States granted waivers to eight countries importing Iranian crude for a 180-day period. And, does oil stand a chance to make a comeback? The agreement struck in 2016 was the first such alliance between Opec and the Russia-led group. As well, production in the USA and Russian Federation has bee soaring.

Meanwhile, global economic growth is under threat from heightened trade tensions, economic instability in some emerging markets and uncertainty over the UK's exit from the European Union. The cartel added that output rose by 127,000 bpd to 32.9 million bpd.

"President Trump will likely continue to keep OPEC in check, making it more hard for OPEC and non-OPEC nations to agree on production cuts", said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc.in Tokyo. "OPEC NGLs in 2018 and 2019 are expected to grow by 0.10 mb/d and 0.11 mb/d to average 6.34 mb/d and 6.45 mb/d, respectively".

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Traders said recent weakness in equities has fanned concerns about global growth, which is also contributing to declines in oil.

The 14-member Opec expects oil supply from its rivals to outpace its own output next year.

In its monthly report on Tuesday, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive forecast cut.

During its last meeting, the Organisation of Petroleum Exporting Countries (OPEC) and its allies led by Russian Federation acknowledged that an oversupply of oil in the market is imminent in 2019.

"OPEC and Russian Federation are under pressure to reduce current production levels, which is a decision that we expect to be taken at the next OPEC meeting on December 6", said Andersson.

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