Oil Prices Rally As Russia May Be Joining The Cuts

Anna Jefferson
December 1, 2018

"Crude oil prices remained under pressure after oil supply in the USA rose ahead of a key OPEC meeting.This comes as some key leaders meet on the sidelines of the G20 summit".

Fundamentally, investors remain concerned about the continuous flow of USA supply along with new worries that Saudi Arabia is insisting that it will not cut production on its own to stabilize supply and prices. With fears of a scarcity now giving way to worries about oversupply, the Organisation of Petroleum Exporting Countries and allies such as Russian Federation are preparing to discuss more cuts when they meet next week in Vienna.

While Saudi Arabia leads the Opec bloc, Russian Federation is the informal leader of the non-Opec bloc of producers.

Brent crude futures (LCOc1) rose 75 cents, or 1.3 percent, to settle at $59.51 a barrel, after touching an intraday high of $60.37 a barrel.

"We are now in contact with OPEC and if needed, we will continue this joint work", Putin said at an investment forum on Wednesday. US crude futures (CLc1) rose $1.16, or 2.3 percent, to $51.45 a barrel, having hit a high of $52.20.

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For almost a month-since an OPEC/non-OPEC panel signaled that there might be a need to cut oil production by 1 million bpd to balance the market-Russia has warned against any hasty decisions on new production cuts and has not officially said that a cut is needed.

That would bring Riyadh to its second problem: Russian Federation, a long-time foe turned ally over the last two years.

US crude stockpiles rose last week, the American Petroleum Institute (API) industry group said on Tuesday.

Oil inventories are rising fast in the United States, where crude stocks have risen for 10 straight weeks to 450.5 million barrels, the most in a year, as production remains at an all-time high of 11.7 million bpd, according to the Energy Information Administration (EIA).

USA crude stockpiles went through a 10th straight week of increase, up 3.6 million barrels in the week ending on November 23, piling concerns over supply surplus and sagging demand growth, according to a weekly EIA report released on Wednesday.

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However, US President Donald Trump has called for refraining from output reductions and help to lower oil prices further.

US crude production C-OUT-T-EIA is at a record high of 11.7 million barrels per day (bpd).

With that in mind, therefore, his meeting with Ibe Kachukwu is a consultation ahead of OPEC's meetings scheduled for November 30th at the G20 in Vienna, and yet another OPEC meeting scheduled for December 6th.

The supply and demand fundamentals remain bearish, but the early price action suggests the technical picture may be improving. -China trade war a key focus.

Also, increased cautiousness ahead of Friday's Trump-Xi meeting on trade keeps the black gold on the defensive.

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