Oil prices skid amid global stock market slump, swelling U.S. supply

OPEC and non-OPEC nations agreed Friday to reduce global oil production. File

OPEC and non-OPEC nations agreed Friday to reduce global oil production. File

"A massive liquidation in long positions by money managers has dampened market confidence on oil prices considerably", said Benjamin Lu of Singaporean brokerage Phillip Futures.

Saudi Arabia proposed a moderate oil-production cut from OPEC and its allies that would gently rebalance the market, seeking to walk a fine line between preventing a surplus and appeasing U.S. President Donald Trump.

However, Saudi Energy Minister Khalid al-Falih told reporters on Thursday morning that a cut of 1 million bpd would be sufficient.

Iran hopes to be exempted from the cuts to keep its economy afloat, as the country faces harsh economic sanctions imposed by the US.

To raise prices, OPEC members, who account for more than half of the world's oil output, will spend the next two days evaluating whether to renew their cooperation with Russian Federation and other non-cartel producers, or simply slash production further. "This includes the general consensus that prospects point to higher supply growth than expected global requirement and there are signs of a potential slowdown in demand", Mazrouei said as part of his opening address to the 175th meeting of the OPEC conference.

Saudi Arabia is equally prepared for a deal or no-deal situation, Al-Falih said.

If Russia contributed around 250,000 barrels per day, the overall cut could exceed 1.3 million barrels per day.

S&P Global Platts reports that Nigeria and Libya would be asked to accept a production cut quota if OPEC can reach a new supply accord at the meeting holding in Vienna on Thursday.

While Saudi Arabia has indicated it is willing to cut production, its decision may be complicated by Trump's decision to not sanction the country over the killing of dissident journalist Jamal Khashoggi.

Some experts saw that as a tactical move by OPEC countries to not announce a production level as they prepare to ask Russian Federation and several other smaller non-OPEC countries to also cut their output.

When President Trump announced his decision to pull the US out of the Iran Nuclear Deal and reimpose sanctions on the Islamic Republic, many oil producers ramped-up production over fears of the effects the sanctions would have on trading.

"The oil cut will be between 1.0 and 1.3 million bpd". The power of OPEC has been diminished, undercutting one of the major geopolitical forces of the last half century.

The shift to net exports is the dramatic result of an unprecedented boom in American oil production, with thousands of wells pumping from the Permian region of Texas and New Mexico to the Bakken in North Dakota to the Marcellus in Pennsylvania.

According to Reuters, five unnamed delegates said ahead of the meeting that the group's preferred level of supply cuts would effectively be conditional on Moscow's contribution. By some estimates, the US this year became the world's top crude producer.

OPEC is also riven by internal conflict, particularly the rivalry between Saudi Arabia and Iran.

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