Global oil market to lapse into surplus in 2019

Galtero Lara
Noviembre 15, 2018

As of 20:39 GMT, the Brent blend futures based on the light North Sea crude oil depreciated by 7.43 percent to $64.91 per barrel.

Oil prices were hit on Monday after US President Donald Trump put pressure on OPEC not to cut supply to prop up the market.

"While slower economic growth in some countries reduces the outlook for oil demand, a significant downward revision to our price assumption is supportive", it added.

OPEC and its partners are discussing a proposal to cut oil output by up to 1.4 million barrels per day (bpd) for 2019, three sources familiar with the issue said, to avert an oversupply that would weaken prices.

In May this year, the parties to the accord agreed to extend the deal until the end of March 2018.

Worldwide benchmark Brent crude dropped nearly 7% to $65.11 (£50.24) a barrel, its lowest level since March.

Futures in NY rose as much as 1.4 per cent after Reuters reported OPEC and its partners are discussing a reduction of as much as 1.4 million barrels a day, deeper than the cut proposed earlier this week.

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"OPEC lowered its demand forecast, and that gives them cover for cutting production", said Phil Flynn, analyst at Price Futures Group in Chicago.

The crude price slide accelerated this week with United States futures suffering their steepest one-day loss in more than three years.

Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown, as seen with the economic contractions in powerhouses Japan and Germany during the third quarter as well as in China's falling vehicle sales. USA shale drillers are the biggest production factor that OPEC and Russian Federation can not control, after all.

Alongside this, much depends on not only OPEC's actions but also Russian Federation and the U.S., who are both producing at record levels, particularly as demand is seen dropping for OPEC oil.

What are countries doing to help raise oil prices?

Following yesterday's price declines, this morning has seen a fresh wave of OPEC source reports, which have suggested that the cartel is looking at potentially delivering a 1.4mbpd oil output cut for 2019, in order to avoid an oil supply surplus that would pressure prices (Decision likely to be taken at the December 6th OPEC meeting).

OPEC - led by Saudi Arabia - along with Russian Federation have been burned by previous decisions to refuse production cuts.

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