Oil Price Sustains Gain As Brent Crude Rises To $59.36 Per Barrel

01 December, 2018, 11:56 | Author: Kevin Carter
  • Saudi Arabia's Crown Prince Mohammed bin Salman arrives in Buenos Aires

Scott Gecas, chief market strategist at Long Leaf Trading Group, believes that Trump's support of Saudi Arabia in regard to the murder of journalist Jamal Khashoggi is a "ploy to influence the Saudis" and keep them from cutting production.

The pivotal question hanging over oil markets remains that of production cutbacks.

OIL prices tumbled lower as an unexpectedly large increase in U.S. crude inventories added to worries about a supply glut ahead of a meeting between top exporters Russian Federation and Saudi Arabia.

At the same time, any cuts must avoid provoking a political reaction from the United States, where the president has continued to press for even lower oil prices. But al-Falih was less definitive than in previous comments and didn't mention an actual production cut.

A seemingly relentless rise in U.S. crude supply, together with Saudi Arabia's insistence that it will not cut output on its own to stabilise the market, earlier sent Brent crude to another 2018 low below $58 a barrel. The price of oil swung from a 52-week high to a 52-week low in just 27 days.

International Brent crude oil futures were at $59.68 per barrel at 0742 GMT, up 17 cents, or 0.3 percent, from their last close. Russian Federation wants more predictability and "smooth price dynamics" in world crude markets, Deputy Foreign Minister Sergei Ryabkov said in Buenos Aires. The kingdom had raised production to an all-time high in November, pumping 11.1 million to 11.3 million bpd.

But the kingdom is wary of upsetting Trump, who has always been vocal - especially via Twitter - about what he sees as the Saudis' obligation to help keep prices low.

Oil prices are heading towards their worst monthly decline in a decade on fears that overproduction will lead to a surplus of supply next year.

More news: World leaders arrive for G20 summit

But despite its sensitive position, under intense global scrutiny with a now increased reliance on political support from the Trump administration, the Saudis are expected to go ahead with cuts, according to a range of market experts.

"1 million bpd or more" off the market?

"Oil prices bounced back late in the day on Friday on reports that the OPEC committee had suggested a 1.3 million barrel per day cut from the October level", said Fawad Razaqzada, market analyst at futures brokerage Forex.com.

Part of the glut is swelling supply in the United States, where commercial crude oil inventories C-STK-T-EIA rose by 3.6 million barrels in the week to November 23 to 450.49 million barrels, according to the Energy Information Administration (EIA). "This will be necessary to avoid severe oversupply in 2019 and to maintain Brent prices within the desired range of $70-80".

However, just as crude futures slid almost to $60 a barrel this month, things changed and prices rebounded just as Russian Federation announced its plan to join the concerted effort by the OPEC and its other members, to cut output.

US West Texas Intermediate (WTI) crude futures were at 51.41, down 4 cents.

Mr MacPherson said if a cut is not agreed, oil prices could tumble further. "If the cut between 1.4 million and 1.5 million bpd occurs, we will see a sharp rebound in prices - anything between $5 to $7 or $8 going before Christmas".

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