Tuesday, 18 December, 2018

Oil rebounds on lower USA stockpiles, possible drop in OPEC supply

Petrol station Image Petrol prices should soon start to fall sharply after two weeks of falling oil costs
Jean Garcia | 17 November, 2018, 18:16

On Oct. 3, when global benchmark Brent crude was sitting around its own four-year high of around US$85 a barrel, Saudi Arabia and Russia announced that they were increasing production in October and November; it was also reported that the Saudis and the Russians had agreed privately to raise production throughout the remainder of the year, in part in response to USA pressure to put a cap on prices.

But when President Donald Trump imposed sanctions November 5, he issued six-month waivers for some of Iran's biggest oil customers.

Indeed, the size of the OPEC+ production cut seems to have grown significantly this week, growing larger with each passing day as oil prices continued their descent.

The dollar also put pressure on oil, hovering near 16-month highs, making crude more expensive for importers using other currencies. Brent Crude sank 6.6 percent to $65.47 a barrell. Total volume traded was about 58 per cent above 100-day average.

For the first half of 2019, based on its outlook for non-OPEC production and global demand, and assuming flat OPEC production, the IEA said the implied stock build is 2 million bpd. But the lift to prices on Wednesday - less than one per cent for WTI - suggests that even such assurances might fall short of restoring bullish sentiment. At Alibra we have noted month-on month increases in the crude sector since September with period rates continuing their upward trajectory this month.

"Producers...have more barrels than they can sell at the moment", said Mercatus Energy Advisors' Corley. Depending on the final baseline, the reduction could be in the range of 1 million to 1.5 million barrels a day, one of the delegates said.

USA ‘must include North Korea sanctions relief in nuke talks’: ex-diplomat
Korean Central News Agency reported that he told investigators that he was under the "manipulation" of the USA spy agency. The three men travelled home with Pompeo and were greeted by Trump on their arrival at an air base near Washington.

As prices slumped into a bear market, a committee of OPEC and allies including Russian Federation on Sunday said they may need "new strategies", signaling curbs may be on the horizon.

Later on Wednesday, investors will get the opportunity to react to the latest inventories report from the American Petroleum Institute. Analysts predict a rise of 3.2 million barrels, according to a Bloomberg survey. "Producers have heeded the warnings and more than met the challenge and today, the Big Three, Russia, Saudi Arabia and the United States, all see output at record levels", the IEA wrote.

Also, the former President, International Association of Energy Economist ( IAEA), Prof Adeola Akinnisibu, said many barrels of Iranian crude would still get to the market, as long as the United States allows some countries to buy the product.

Once the oil industry's star product, gasoline is now losing oil refineries money in Europe and has plunged in value against diesel, its main competitor.

Oil has tumbled to its lowest price in a year as concerns mounted about rising output and slowing global demand. Contributions of 200 words or more will be considered for publication.

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