Published: Wed, November 21, 2018
Markets | By Erika Turner

Oil Slips As Russia Mulls Production Cuts

Oil Slips As Russia Mulls Production Cuts

U.S. West Texas Intermediate (WTI) crude futures, were up 76 cents, or 1.4 percent, at $57.22 per barrel.

United States crude production has soared nearly 25 per cent this year, to a record 11.7 million barrels per day (bpd).

Crude markers in NY and London have both fallen more than 20% from their October highs on concerns over a supply glut after the US granted waivers to some buyers of Iranian oil despite sanctions.

IEA's Birol also continued to warn OPEC and its partners against the impact of resuming supply cuts.

Oil prices are around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States, as well as a slowdown in global trade. However, the bounce in oil prices had been short-lived as Russian Federation stated that they would want to take a wait-and-see approach with regard to a potential supply cut.

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Refiners in Japan and South Korea are looking to resume Iranian oil imports from January after receiving waivers from USA sanctions on Tehran, sources familiar with the matter said. While trade tensions between China and America weaken the outlook for demand, Saudi Arabia's oil policies aim to preserve market stability, the nation's king said during his first major public speech since the murder of prominent journalist Jamal Khashoggi. The December contract, which expired on Monday, gained 0.5 percent to $56.76. This is reality. Production is rising, led by increasing output from the United States, Russia and Saudi Arabia, which now accounts for about a third of US daily consumption. Total volume traded was about 5 percent below the 100-day average.

In other news, USA energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, according to energy services firm Baker Hughes. With signs of economic and oil demand growth slowing, the market may be expecting an announcement of a sizeable output reduction in early December, and could be bitterly disappointed should OPEC fail to live up to this expectation.

Despite today's sharp downward trend, some analysts think that prices are set to regain ground over the next month, based on the trends from past such oil price slumps. 9, according to government data.

The Organization of the Petroleum Exporting Countries (OPEC), de facto led by Saudi Arabia, is pushing for the producer group and allies to cut 1 million to 1.4 million barrels per day (bpd) of supply to adjust for a slowdown in demand growth and prevent oversupply.

Oil tumbled below $54/bbl for the first time in a year amid concern OPEC's plans to cut production won't be enough to stem a surge in stockpiles and a selloff in global equities.

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