OPEC, Canada Make Moves to Raise Crude Prices

Andrew Cummings
December 3, 2018

Saudi Arabia led suppliers to cut production two years ago to curb a glut, then reversed course in June on concerns that USA sanctions on Iran could create a shortage.

Markets are now eyeing the OPEC meeting with Russian Federation and other major petroleum exporters on December 6 in Vienna to discuss exact production cuts next year.

On Thursday, oil prices bounced as Russia President Vladimir Putin said that his country was in contact with OPEC and willing to continue cooperation with the Saudi-led oil cartel.

Investors remained doubtful over potential supply cuts, which tops the agenda of a meeting between Saudi-led OPEC and its allies in Vienna.

While there was no announcement on how much would be cut and for how long, the pact between the world's two biggest crude exporters was cheered by oil traders, with Brent jumping USD 2.42 to USD 53.35 and West Texas Intermediate up USD 2.60 at USD 62.06 on Monday. "But the details are now what matter - how much will be cut, from when, for how long and, crucially, from what baselines".

Last month, an advisory group to OPEC told the ministers that the market is witnessing an oversupply which is driving the oil prices down.

On Sunday, OPEC's president, U.A.E. Energy Minister Suhail Al Mazrouei, said he was optimistic OPEC+ will reach an agreement over a reduction in production for 2019 when they meet.

IG Market Analyst, Kyle Rodday says the news post-OPEC meeting could be significant.

Prices of the global benchmark, Brent crude went tumbling about a third from an October high due to multiple reasons including rising supply from the USA shale regions, Saudi Arabia and Russian Federation, slower demand growth and American waivers on oil sanctions on Iran. Those include "expectations of slower oil demand growth next year, robust U.S. supply...and vocal pressure from [U.S. President] Donald Trump to keep prices lower". WTI fell 1.27 US dollars to settle at 50.29 dollars a barrel, while Brent fell 1.72 dollars to close at 58.76 dollars a barrel. The January contract rose about 1% for the week. Its November production surged to an all-time record above 11 million barrels a day as prices swooned, prompting a jubilant response on Twitter from the White House.

The price of a barrel of Brent crude in February was $60,23 (+0,53%).

However, WTI prices plunged by roughly 22% in November, according to Dow Jones Market Data, after trading at a four-year high as recently as early October. They also recommended a cut of around 1.3 million barrels a day from October levels.

That has left Brent was down about 12% so far this year, as surging oil production in the US, Russia and among key members of OPEC has helped to create a glut in global markets.

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