Oil Crashes After Trump Says Prices Should Be 'Much Lower'

Saudi energy minister Khalid al Falih is looking to cut oil production to shore up sagging prices

Saudi energy minister Khalid al Falih is looking to cut oil production to shore up sagging prices

"In 2019, non-OPEC oil supply growth was revised up by 0.12 mb/d from the previous month, forecast to stand at 2.23 mb/d and is now projected to reach an average of 62.09 mb/d". Putin said an oil price of around $70 per barrel suited Russian Federation.

"This will, in our view, cap any upside above $85 per barrel (for oil prices)", said Jon Andersson, head of commodities at Vontobel Asset Management. "It is not only manifested in the demand for OPEC oil as estimated by forecasters, but also in OECD stock levels", said PVM Oil Associates strategist Tamas Varga. This in turn has offered a bounce for oil prices with Brent crude jumping 1.4%, potentially establishing a near term bottom.

Brent crude settled up 65 cents, or 1 percent, at $66.12 a barrel, after hitting a session high of $67.63.

Citing the Trump administration's decision to grant the top buyers of Iran's oil a temporary waiver from sanctions imposed on November 5, Al-Falih said the "sanctions didn't cut so much out of the market as anticipated", Radio Free Europe reported.

Additionally, any talk of production cuts will likely raise the ire of President Trump who may have single-handedly driven prices lower on Monday when he told OPEC not to cut production. An industry report was said to show U.S. stockpiles rose 8.8 million barrels last week, more than double the increase forecast in a Bloomberg survey before government data due on Thursday.

Russia-which together with Saudi Arabia and some Arab Gulf producers has been raising production since June to offset Iranian losses-saw its oil production set a new post-Soviet record high of 11.41 million bpd in October, up from 11.36 million bpd in September.

Even though the analytical community believes the Organization of the Petroleum Exporting Countries' (OPEC) bid to reduce crude production (and reverse oil's recent price slump) is a fait accompli, mixed messages from various parties suggest it may be an struggle for the cartel to gain approval for the scheme when it convenes in Vienna next month.

Analysts expect slower growth in oil demand from both China and the USA next year, given the concerns about a possible slowdown of the global economy and associated uncertainties.

In addition to Trump's tweet, the price of oil has come under pressure because of fears that weakening economies outside of the USA could diminish demand. Another source, an OPEC delegate, agreed that a larger cut than 1.4 million bpd was possible, depending on the market.

The United States will lead the output growth. Traders are also concerned about the strength of US shale production and the risk of a slowing global economy.

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