Published: Fri, November 16, 2018
Markets | By Jeffery Armstrong

Oil prices collapse as OPEC sees production outpacing demand

Oil prices collapse as OPEC sees production outpacing demand

Anxious by a drop in oil prices and rising supplies, the Organization of the Petroleum Exporting Countries is talking again of reducing production just months after increasing it. "In December when we meet, if there's a requirement to curtail, whatever the required cut, we will cut in accordance to what we agree on", Mr Al Mazrouei said.

Saudi Energy Minister Khalid al-Falih had already said on Monday that Opec had agreed there was a need to cut oil production next year to prevent oversupply.

Depending on the final baseline for the production cuts, the reduction could be in the range of 1 million to 1.5 million barrels a day, one of the delegates said.

Even as the US was planning to grant the Iran waivers, Trump was badgering other members of OPEC to boost production to make up for any loss of Iranian supply. Some countries such as India and South Korea have signed a waiver, that will allow them to continue exporting limited volumes of Iranian oil without being shut out of the United States financial system.

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At the same time, supply has been surging, especially due to a 22 percent rise in USA crude oil production this year to a record 11.6 million barrels per day (bpd).

An International Energy Agency report that pointed to rising global inventories also added to oversupply concerns.

Trump posted a tweet on Monday meant to put pressure on OPEC, calling for no supply cuts to prop up prices.

Tuesday's drop, which saw both Brent and WTI fall by about 7%, was driven largely by a tweet from US President Donald Trump urging Saudi Arabia not to cut production.

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The OPEC-led deal got rid of a supply glut that built up in 2014 as supply from the United States and other countries outside the group soared.

Meanwhile, Brent crude for January delivery grew 0.65 dollar to close at 66.12 dollars a barrel on the London ICE Futures Exchange.

According to the report, OPEC crude output went up to 32.99 million barrels per day in October, "up 240 kb/d on a year ago". While the Organization of Petroleum Exporting Countries has indicated it looks to return to production cuts, Russian Federation has not joined the verbal interventions, adopting a "wait and see" approach at an Abu-Dhabi meeting with its allies this week.

OPEC's boss says current market volatility is due to anticipation of the cartel's impending summit.

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"We are closely following the development of the situation on the energy markets". The imposition of limited access to the financial system and asset freezes came shortly after the USA announced plans to end air refueling flights for the Saudi-led coalition fighting Houthi rebels in Yemen.

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