Published: Sat, December 01, 2018
Money | By Bruce West

Oil slips further as supply glut knocks sentiment

Oil slips further as supply glut knocks sentiment

Futures for WTI crude oil for January in electronic trading on the NY Mercantile exchange (NYMEX) is $49,56 per barrel, or $0.73 per (1.45 percent) below the level of the previous session.

Futures in NY are set to drop about 21 per cent in November, falling for a second month.

"This time around, given the large oversupply we have in the market, we think anything between 1.3 and 1.5 million barrels could come off the market when they meet in Vienna", Khoman told CNBC's "Capital Connection" on Wednesday.

"WTI oil is now trading right around the $50 per barrel level, a price last seen well over a year ago, as the current oversupply situation has now manifested itself in 10 consecutive weekly increases in USA oil inventories", said William O'Loughlin, Investment Analyst at Australia's Rivkin Securities. "There is optimism over Opec's supply cuts as well as slowing U.S. output as current prices could idle shale production".

That said, many analysts believe that OPEC and its partners would need to cut output by one million barrels a day or more to support prices.

Goldman Sachs and Credit Suisse, in separate reports, issued similar assessments that predict a Saudi cut, in coordination with other OPEC and non-OPEC members.

Before the OPEC meeting, the world's top three producers - the United States, Russia and Saudi Arabia - will be part of a meeting of the Group of 20 industrialised nations in Buenos Aires, Argentina, this weekend.

Putin also thanked Saudi Arabia and its Crown Prince for the OPEC-Russia cooperation in managing the oil market.

A slowdown in oil demand growth is compounding the emerging oversupply.

Surging oil production in the US, Russia and by members of the Middle East-dominated Opec countries has helped fill global inventories and create a glut in some markets.

United States crude production is at a record high of 11.7-million barrels a day.

A monthly Reuters survey indicates that output in November from the 12 OPEC members with supply reduction targets under a previous production agreement fell 110,000 barrels per day from October, while total OPEC output decreased by 160,000 bpd.

The weakness in sentiment is visible in the Brent forward price curve, which now has prices for future delivery above those for immediate dispatch, a structure known as "contango", which can make it attractive to put oil into storage.

On Friday, a CME group indicator suggested that expectations of a production cut were weakening.

Callum MacPherson, head of commodities at Investec, attributes the "aggressive move down" in the price of brent crude, from $86 to $60, has been due to the oil market being "oversold", with investors selling off.

The US Energy Information Administration, meanwhile, said nationwide crude stockpiles jumped by 3.58 million barrels last week, well above the 1 million barrel increase predicted by analysts in a Bloomberg survey.

"Near-term oversupply has gutted Brent prices", US investment bank Jefferies said in a note on Friday, adding that there was "an increasing urgency to move crude into storage".

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