Counter-Trend Buyers Pinning Hopes on Production Cuts, Trade Deal

Ann Santiago
December 1, 2018

At 1300 GMT, January WTI crude oil is trading $50.97, up $0.68 or +1.35% and January Brent crude oil is at $59.42, up $0.66 or +1.12%.

America and OPEC did boost their output to rein in the global oil prices and then the subsequent relaxation of sanctions for countries, especially like India to import oil from Iran resulted in a market surplus leading to the reduction in crude price.

The choice facing Saudi Arabia at next week's OPEC meeting is dramatic: cut oil production and enrage Donald Trump, or keep pumping and risk ultra-low prices blowing up its economy.

November still marks the largest one-month drop for oil since the financial recession ten years ago, having lost about 22 percent so far.

Earlier this week, Russian President Vladimir Putin said crude around US$60 a barrel is " balanced and fair", but also added that Moscow is ready to cooperate with its fellow producers.

ANZ bank said on Friday that oil prices were rebounding "as signs that OPEC+ was moving closer to an agreement around further production cuts".

The chart shows the cost of production of oil and gas per barrel for the countries by using data from Rystad Energy UCube and The Wall Street Journal. "There is optimism over OPEC's supply cuts as well as slowing US output as current prices could idle shale production".

FGE estimates that Iraq could pump as much as 4.7 million barrels a day next year - depending on what OPEC and other producers decide at their December 6 meeting - compared with about 4.5 million in November.

For Mohammed bin Salman, the kingdom's crown prince and day-to-day ruler, the dilemma has been sharpened by the murder of Jamal Khashoggi in the Saudi consulate in Istanbul. The market is flirting with expectations that the Organization of Petroleum Exporting Countries and allied producers may agree on output curbs at their gathering next week in Vienna. EIA says USA crude oil inventories are now 7 percent above the five-year average for this time of year.

"We are now in contact with OPEC and if needed, we will continue this joint work", Putin said at an investment forum on Wednesday.

Oil-market news WTI's 14-day Relative Strength Index indicates the U.S. marker's remained in oversold territory since November 1 Shale explorers will likely cut spending budgets next year for the first time since the last price crash as crude spirals down again, analysts said.

"Furthermore, our partners are helping us by introducing all these unlawful restrictions and violating principles of the global trade, because the whole world sees the dollar monopoly is unreliable; it is risky for many, not only for us", he said.

But the United States also offered generous waivers to allies who imported Iranian crude and might have struggled to find other supplies quickly when U.S. sanctions kicked in on November 4.

"Iraq has been increasing production, but not to the extent that Saudi Arabia has done".

"Thank you to Saudi Arabia, but let's go lower!"

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