Oil Prices Should Be Lower, Hopes OPEC Won't Cut Production

Oil Prices Should Be Lower, Hopes OPEC Won't Cut Production

Oil Prices Should Be Lower, Hopes OPEC Won't Cut Production

Saudi Arabia has said it will trim oil exports by 500,000 barrels per day (bpd) in December, as major producers met to consider cuts to shore up declining prices.

Khalid al-Falih's comments followed a meeting in Abu Dhabi at the weekend, where major producers started laying the groundwork to cut supply in 2019, reversing an nearly year-long expansion. The oil producers could agree (though Russian Federation doesn't want to) to reduce the output to somewhere between the May and October figure (say a cut of up to 1 million) - cutting all the way to May level may attract the wrath of Donald Trump.

Markets have fluctuated in recent weeks as a result of fears over a possible drop in supply, as a result of U.S. sanctions on Iran, and an oversupply, as a result of increased production by Saudi Arabia, Russia and the USA, which have seen prices fall by about 20 percent since early October.

U.S. crude prices fell for the 11th consecutive session, the most on record since the contract began trading, retreating from a rally early in the session as U.S. President Donald Trump said he hoped there would be no oil output reductions. The uptick in supply and the United States granting of waivers to eight countries to keep importing Iranian oil despite USA sanctions re-imposition this month have contributed to the oil price fall.

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Benchmark Brent crude, which had been trading above $80 a barrel recently, now hovers just over $70 after the USA sanction waivers on Iran.

While no decision to reduce supply was taken over the weekend, this month's report will add to the chorus of views within the group, pushing for new cuts.

The US also hit a record-high of 11.6m bpd in November, CNBC reported.

Oil prices advanced steadily through Monday, with both Brent crude and West Texas Intermediate (WTI) seeing gains of more than a dollar per barrel.

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Oil prices have shed a fifth of their value in just one month after surging to a four-year high in early October, driven by a combination of factors centred on higher supply and fears of sluggish demand.

President Trump is expressing his opposition to Saudi Arabia and OPEC's possible intentions to curb oil production.

Another potential problem: Thatte notes that money managers' oil positioning, which has historically moved with oil prices, are at a 15-month low.

"We will assure you that when we meet in December we will go to the market with the solution that will ensure market stability", he said. Trump said in a tweet. However, the USA has granted waivers to certain major importers of Iranian crude, diminishing the expected cuts.

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While market analysts worry over a suddenly bearish market, Mr Al Falih cautioned against being driven too keenly by sentiment over fundamentals and that the group must support members facing critical challenges due to sanctions and other disruptions.

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