Oil Extends Losing Streak To Record 12 Sessions: What's Driving Prices Lower?

Andrew Cummings
November 14, 2018

The oversupply issue is the main focus in oil right now and Iran's sanctions failed to sap out production as anticipated, no thanks to U.S. waivers of course. That would represent a growth rate of 2.23 million bpd for 2019 from 2018, an upward revision by a considerable 120,000 bpd from OPEC's October Monthly Oil Market Report.

Brent crude, the European benchmark, was trading just above $65 a barrel while United States crude futures stood just below $56 - its lowest mark for 12 months.

The producer cartel of the Organisation of the Petroleum Exporting Countries (OPEC), whose member states rely on high oil prices to finance government budgets, has been watching the jump in supply and price slump with concern.

The Opec+ alliance may cut its output by up to a million bpd next year, if needed, to balance the market, Saudi Oil Minister Khalid Al Falih said this week.

Oil prices have dropped to their lowest level in over eight months amid fears about a slowdown in demand.

The crash in oil prices appears to be overdetermined.

That led to a sharp price drop on Monday, which continued into Tuesday.

OPEC warned on Tuesday that an oil supply glut could emerge in 2019 as the world economy slows and supply from rival producers rises more quickly than expected, building a case for a policy U-turn to cutting output at a meeting December 6.

President Donald Trump has tweeted that they shouldn't cut production, setting up a standoff between the US administration and OPEC before it meets in Vienna on December 6.

Trump on Monday said he hoped OPEC will not cut production, making it clear he wants oil prices to fall.

Brent Crude has now fallen over 25% since hitting a four-year high in early October, while U.S. oil has lost 28% since its October peak.

Oil prices, which spiked in October in the run-up to the reimposition of U.S. sanctions on Iran's oil industry on November 5, fell after the USA granted waivers to eight countries importing Iranian crude for a 180-day period. In July, Trump called the organization a "monopoly", warning on Twitter that "gas prices are up & they are doing little to help". Kazakhstan said on Tuesday its oil output rose 4.8 per cent to 74.5 million tonnes in the first 10 months of 2018, equivalent to 1.82 million bpd.

On Monday, the rupee settled at 72.89 per dollar, showing a loss of 39 paise or 0.54 per cent over the last close due to a rise in oil prices after Saudi Arabia announced plans to cut production and the dollar strengthened in global markets.

Riyadh indicated on Monday it was on course to ignore the USA president's wishes at OPEC's next meeting due in December because it saw a need to reduce OPEC output by a collective one million barrels per day during 2019.

Other reports by iNewsToday