OPEC moves to combat plummeting oil prices

Muriel Colon
November 14, 2018

"Equities and oil were pretty much falling in lock-step", said Josh Graves, senior market strategist at RJO Futures in Chicago.

Both Brent Crude and West Texas Intermediate (WTI) saw gains of more than a dollar per barrel.

Saudi Energy Minister Khalid al-Falih said on Monday that oil cartel Opec agreed there was a need to cut oil supply in 2019 by about 1-million barrels a day from October levels to prevent oversupply.

"We in Abu Dhabi have been very optimistic and, in a way, bullish about the market situation", Abu Dhabi National Oil Co.

In fact, all three countries are pumping at or near record highs, with other OPEC members and exporting nations also turning on the taps.

The worry: The Organization of the Petroleum Exporting Countries (Opec), which includes Saudi Arabia and Iraq and Iran, and other non-Opec oil producers such as Russian Federation met in Abu Dhabi on Sunday to discuss oil cuts. In June 2014, Iraq announced that its production would more than double to 8.4 million barrels a day by 2018. "So far I don't see any necessity for this". Since hitting four-year highs last month, crude prices have slumped on rising production, Chinese economic growth fears, and easing concerns about the impact of sanctions on Iran.

Oil prices rose more than 1 percent on Monday, set for their largest one-day increase in a month after the Saudi comments.

Senate Minority Leader Chuck Schumer, a New York Democrat, had previously supported legislation that would remove an existing immunity shield that prevents the oil cartel and its members' national oil companies from being sued under USA antitrust law. Moreover, the Organization of the Petroleum Exporting Countries (OPEC) is reportedly considering cutting oil productions again next year following the output curbs issued in 2017.

"We're kind of back to square one: It must feel like November 2016 to them, a lot", said John Kilduff, a partner at Again Capital Management in NY, referring to the time period when OPEC and its allies agreed to initiate production cuts. A drop off in crude oil prices in the recent period has weighed on oil and gas companies. To keep oil prices high, OPEC and its allies would have to keep reducing production further and further.

Global benchmark Brent crude oil futures were at $69.47 a barrel, down 65c, or 0.9%, from their last close.

USA oil production is primed to keep skyrocketing - and the higher oil prices go in the short term, the bigger the jump in US output will be.

"However, producers are concerned that the latest selling frenzy could see Brent oil reach $60 or below".

A majority of OPEC and allied oil exporters support a cut in the global supply of crude, Oman Oil Minister Mohammed bin Hamad al-Rumhi was cited by Reuters as saying.

Trump's tweet comes one week after the USA reimposed sanctions on Iran's oil industry.

Saudi Arabia, Russia and the USA - the world's top three exporters - have more than compensated for lost Iranian barrels since the start of the month.

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