Oil climbs as OPEC output curb plan overshadows USA production

Crude Oil

Crude Oil

Crude futures fell to fresh session lows after President Donald Trump issued a statement saying the United States stands by Saudi Arabia following the slaying last month of journalist and US resident Jamal Khashoggi by Saudi agents.

Crude markers in NY and London have both fallen more than 20 percent from their October highs on concerns over a supply glut after the U.S.

Russian Energy Minister Alexander Novak said Russia planned to sign a partnership agreement, and that details would be discussed at OPEC's December 6 meeting in Vienna. "Oil market had a lot of noise thrown at it overnight, IEA notwithstanding, but still bounced back, suggesting details of December 6 meeting should provide a stable platform for prices over the near term".

Last week, Saudi Arabia had expressed the need for oil producers to cut output by 1 million barrels a day to reduce oil supply in 2019 due to a likely drop in demand for crude oil.

Crude futures rose ahead of settlement in choppy trade on Monday, supported by a reported drawdown of USA oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts. "It is not unreasonable to anticipate stable prices until then", Tamas Varga, PVM Oil Associates strategist, said. The contract fell as much as 7.7 per cent earlier in the session to $52.77 a barrel, the lowest since October 2017.

West Texas Intermediate for December delivery, which expires Monday, traded at $57.19 a barrel on the New York Mercantile Exchange, up 73 cents, at 3:29 p.m.in Singapore.

Around the same time, International Energy Agency and other organisations lowered oil demand and growth outlook as a fallout of high crude prices as well as the US-China trade war.

USA crude oil production has soared by nearly 25% this year, to a record 11.7-million barrels a day.

The number of working American oil rigs gained by 2 to 888 last week, the highest level since March 2015, Baker Hughes data said. United States crude production has been rising, hitting a record in the week ended November. "Recall oil prices, which had already fallen 29 per cent going into the November 2014 OPEC meeting, fell another 10 per cent the day after the meeting and were down 25 per cent the month after as OPEC disappointed on supply cuts".

While Saudi Arabia Energy Minister Khalid Al-Falih indicated production cuts are needed, his Russian counterpart, Alexander Novak has taken a more wait-and-see approach. Money managers have cut their net bullish Brent and WTI oil bets to the lowest in 17 months, weekly ICE Futures Europe and CFTC futures and options data on four contracts show.

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