Oil prices edge up on expected OPEC supply cuts

Ivan Schwartz
November 20, 2018

Brent crude futures, the worldwide benchmark for oil prices, were at $65.62 a barrel at 1342 GMT, down $1.17, or 1.77 percent, from their last close. However, crude purchases may be put on hold beginning in March as they wait for the Japanese government to extend sovereign ship insurance into the new financial year that starts on April 1.

Even less confident in OPEC's proposed strategy was Fatih Birol, executive director of the International Energy Agency: at a news conference in Bratislava, he said the crude market is now well supplied but spare capacity in Saudi Arabia is thin, and therefore cuts by key players could tighten markets.

Alexander Novak, Russian Energy Minister, stated that Russia, which is not an OPEC member, meant to sign a partnership agreement with the group.

"Meanwhile, producers are considering supply reductions in response and we expect OPEC to agree to a supply cut at its next official meeting on 6 December", BNP said.

US West Texas Intermediate (WTI) crude futures, were up 61 cents, or 1.1 per cent, at $57.07 per barrel.

The Organization of the Petroleum Exporting Countries is pushing for a supply cut of 1 million to 1.4 million bpd.

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Despite the flurry of various reports from many sides within the cartel that an OPEC cut is in the making, oil prices plunged on Tuesday morning, depressed by the stock market sell-off and renewed concerns about oil oversupply. "It is not unreasonable to anticipate stable prices until then", PVM Oil Associates strategist Tamas Varga said. While trade tensions between China and America weaken the outlook for demand, Saudi Arabia's oil policies aim to preserve market stability, the nation's king said during his first major public speech since the murder of prominent journalist Jamal Khashoggi. Total volume traded was about 5 percent below the 100-day average. The contract fell as much as 7.7 per cent earlier in the session to $52.77 a barrel, the lowest since October 2017.

Analysts and traders say the oil market rout has deepened due to momentum trading and investors dumping crude futures to buy natural gas contracts.

U.S. energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, a weekly report by energy services firm Baker Hughes said on Friday.

While Saudi Arabia Energy Minister Khalid Al-Falih indicated production cuts are needed, his Russian counterpart, Alexander Novak has taken a more wait-and-see approach.

This comes as supply in the United States is surging. The Cboe/Nymex Oil Volatility Index fell more than 3% on Friday, declining for a third day.

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