Oil prices surge ahead of OPEC meeting

Ivan Schwartz
December 3, 2018

The Organization of the Petroleum Exporting Countries meets on December 6 to decide output policy.

"We may see prices recovering to $60 a barrel this month and depending on how much and until when OPEC's output curbs will continue, we might be heading toward $70", Sungchil Will Yun, Seoul-based commodity analyst at HI Investment & Futures, said by phone. The price of West Texas Intermediate (WTI) for January delivery increased 1.01 percent, while Brent crude for January delivery lost 0.15 percent, during the week ending November 30. Total volume traded was more than triple the 100-day average.

As the downbeat mood takes hold, analysts at Oppenheimer said in a Friday note that they're cutting their WTI oil price estimate for 2019 by 15%, to $61 a barrel. The global benchmark crude was at an $8.59 premium to WTI for the same month. 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.

Speaking to Bloomberg, Derek Brower, a director at consultant RS Energy Group said "This might be the critical breakthrough for OPEC and non-OPEC to cut". "But the details are now what matter - how much will be cut, from when, for how long and, crucially, from what baselines". Brent crude rose 5.3 percent or $3.14 to a high of $62.60 and was last trading around $61.60. Losses were limited on Friday, however, on hopes of a production cut agreement.

"Markets think there will be some sort of a cut", said Mike Wittner, head of oil market research at Societe Generale SA.

The only thing that will push the price of WCS up and keep it higher is more pipeline capacity out of the oil sands region. "It's a bullish set up all around".

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In the meantime, USA estimated oil output has increased by 11.7 Million bpd. WTI and Brent settled at 50.42 USA dollars and 58.8 dollars per barrel, respectively, at the end of the week.

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.

However, Donald Trump and Xi Jinping on Saturday announced a deal that will see the U.S. hold off raising levies on Chinese goods on January 1 and China promise to buy more from the U.S., while entering a 90-day period of talks to bring an end to the dispute.

"This has flowed through to oil prices at this early stage of the week, primarily due to the pro-growth impacts of a de-escalation in the trade war".

Oil prices jumped by more than 5 percent on Monday after the United States and China agreed to a 90-day truce in a trade dispute, and ahead of a meeting this week of the producer club OPEC that is expected to cut supply.

Other reports by GizPress

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