Tuesday, 18 December, 2018

Oil Slips As Russia Mulls Production Cuts

Embedded Image Oil falls after Russia preaches patience rather than production cuts
Jodi Jackson | 21 November, 2018, 12:58

So, the price of January futures for North sea Brent crude on London's ICE Futures exchange at 8:50 in Kiev declined to $0,46 (0.69 percent) to $66,33 per barrel.

Brent fell as much as 7.6%, or $5.08 a barrel, to hit $61.71, its lowest point in more than 11 months.

US crude oil inventories posted a drawdown of 1.545 million barrels in the week ending Friday, according to statistics released on Tuesday.

Global benchmark Brent crude has been on a downhill journey since it four-year high of $86.74 a barrel on October 1 and trading over 20% lower than its November 2014 level.

"For a cut to be successful in supporting the market, they're going to have to present a front that is not fractured and the chance of that is looking less and less likely as December 6 approaches", said Bob Yawger, director of energy futures at Mizuho in NY. The exemptions allow these parties to buy a reduced volume of Iranian crude for the 6-month period, but volumes and details on the waivers remain a bilateral secret, Kallanish Energy notes.

"I think there is a corner of the market that says, 'Well wait a second, is Saudi Arabia really going to go forward with removing so many barrels in a situation where President Trump remains a stalwart ally of the Saudi government?" she told CNBC's "Squawk Box" on Monday. The S&P 500 Energy Index slid as much as 3.5%, with all of its members down on the day.

Firmer supply than anticipated due to waivers granted on Iranian oil exports, as well as concerns about demand, have weighed on prices, and uncertainty about the response of OPEC+ (the cartel and certain non-members including Russia) lingers. US inventories are on track for a ninth weekly increase, the longest run in more than a year, according to a Bloomberg survey before government data due Wednesday.

Embedded Image
Oil prices climb on prospect of OPEC and Russian cuts

Wednesday's rebound came after a report by the American Petroleum Institute late on Tuesday that USA commercial crude inventories last week fell unexpectedly by 1.5 million barrels, to 439.2 million, in the week to November 16.

US crude oil production has soared by nearly 25 percent this year, to a record 11.7 million barrels per day (bpd).

The Opec envoy for the United Arab Emirates said it was very likely that the group would reduce output but the exact level had yet to be decided.

The broader cooperation is seen as an evolution to the current production cut deal.

Oil prices pared losses briefly after data from industry group the American Petroleum Institute showed crude inventories fell by 1.5 million barrels last week to 439.2 million.

According to Credit Suisse, prior to oil's selloff in early October, macro/discretionary funds and CTAs held a net long position that ranked in the top decile over the past five years.

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