Oil gives up some of its OPEC gains as stock markets sag

Muriel Colon
December 13, 2018

Brent climbed to as high as $63.73 per barrel on Friday after OPEC said it would begin curbing its production by 800,000 bpd for six months beginning January 2019. Saudi Arabia, the de facto leader of OPEC, had been facing demands from United States president Donald Trump not to go for the output cut, as it would increase the oil price.

The move to cut 1.2 million barrels per day from the market was not easy, according to UAE Minister of Energy Suhail Mohamed Al Mazrouei.

Organisation of the Petroleum Exporting Countries (OPEC) and its allies, on December 7, made a decision to curtail oil production by 1.2 million barrels per day for a period of six months starting from January 2019 to reduce the current surplus and provide a balance to global oil markets.

At 0846 GMT, February WTI crude oil is trading $51.04, down $0.16 or -0.31% and February Brent crude oil is at $59.78, down $0.19 or -0.32%.

They discussed the "state of the oil market" and energy cooperation between the two countries during a meeting in eastern Dhahran city, the minister, Khalid al-Falih, said on Twitter.

U.S. crude stockpiles fell by 1.2 million barrels in the week to December 7, the U.S. Energy Information Administration said, smaller than the draw reported by industry group the American Petroleum Institute on Tuesday and less than half the draw of 3 million barrels analysts had forecast.

"Oil hits $70-$75 a barrel and USA production starts soaring, and US exports start soaring again, and the countries involved in production cuts have to meet again to rein in production", he said.

The supply surge from the world's top three oil producers occurs as forecasters warn oil demand growth will be softer than anticipated next year.

The world's leading oil cartel OPEC reached a deal with non-OPEC oil producers last week in Vienna to curtail the daily output of crude, meant to help stop oil prices from sliding further downhill that began in October.

Kotak Institutional Equities expects a gradual recovery in crude prices from the recent lows, as the proposed curtailment by OPEC and Canada will balance the global oil supply demand in the near term, especially as seasonally weak demand season gets over in Q1CY19.

Despite Friday's OPEC-led decision to trim output by 1.2 million barrels per day starting in January, overall sentiment remains a little bearish as traders cast doubts that the planned supply cuts will be enough to trim supply and stabilize prices.

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