Oil Slips As Russia Mulls Production Cuts

Jermaine Castillo
November 21, 2018

"The market's bullish radar is still waiting for OPEC+ to deliver a sizeable cut number", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Crude oil prices were lower Monday morning at the start of a holiday-shortened week that will see reduced volume as traders and investors tested recent lows, and also as the front-month WTI contract was set to move January.

How likely is an OPEC+ production cut?

Refiners in Japan and South Korea are looking to resume Iranian oil imports from January after receiving waivers from US sanctions on Tehran, sources familiar with the matter said.

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Hussein Sayed, chief market strategist at futures brokerage FXTM said USA comments from APEC "suggest that a deal between President Trump and President Xi is unlikely to see the light when the leaders meet at the G20 Summit later this month".

Crude oil futures for January ended down $3.77, or 6.6%, at $53.43 a barrel, the lowest settlement price in about 13 months.

Trade tensions between the world's biggest economies escalated over the weekend with U.S. Vice President Mike Pence's attack on China, adding to worries supply may overtake demand. On Monday, Japan's Ministry of Finance reported that October crude oil imports fell by 7.7 percent from the same month a year ago, to 2.77 million barrels per day (bpd). The December contract, which expired on Monday, gained 0.5 percent to $56.76.

A belief by market participants in OPEC and Russia's resolve to agree on productions cuts in a bid to push the price higher "is not to be believed until the results are seen while The Baker Hughes North American Rig count continues to increase on a week over week basis", he said.

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"Fundamentals over the next six months point to a recovery in oil prices following their sharp decline in October and early November", BNP Paribas said.

Concerned about an emerging production overhang similar to the one that led to a price slump in 2014, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of 1 million to 1.4 million bpd. The official crude inventory data from U.S. Energy Information Administration will be out at 10:30 AM on Wednesday.

Other oil-market news: A group of oil companies including Chevron and Royal Dutch Shell Plc pledged more than $100 million to support private investment in the Permian Basin in Texas and New Mexico as the region struggles with the effects of a boom in production. "Oil market had a lot of noise thrown at it overnight, IEA notwithstanding, but still bounced back, suggesting details of December 6 meeting should provide a stable platform for prices over the near term".

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