Oil prices slumped to their lowest levels of 2018 Friday, ramping up the pressure on OPEC ahead of a much-anticipated meeting between the influential oil cartel and its allied partners.
International benchmark Brent crude traded at around $59.47 a barrel, down $3.13, or 5 percent at 9:08 a.m. ET Friday morning. Meanwhile, West Texas Intermediate crude (WTI) fell $3.37, or 6.2 percent, to $51.26 after briefly sliding about 7 percent below $51 a barrel in light trading due to the Thanksgiving holiday
The latest wave of energy market selling comes amid escalating concerns about an increase in global supply and a slowdown in economic growth.
OPEC and non-OPEC members are expected to start curtailing output at a meeting in Vienna on December 6.
But, so far, the prospect of the Middle East-dominated group orchestrating a fresh round of supply cuts has done little to prop up crude futures.
The value of a barrel of oil has tumbled approximately 20 percent since the start of the month, adding to a seven-week streak of consecutive losses. It has been one of the biggest declines in crude futures since a price collapse in 2014.
The recent downtrend in oil prices has most definitely taken "some by surprise," Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Friday.
"The question is … How much longer (are) bears are able to keep firing?" Varga said.
Global oil supply has surged in 2018, with the International Energy Agency (IEA) recently predicting non-OPEC output alone would climb to 2.3 million barrels per day (bpd) this year. That is an increase of half a million bpd when compared to the group's forecast from six months ago.
Meanwhile, the IEA expects demand in 2019 to grow at a rate of 1.3 million bpd, down slightly from a forecast of 1.5 million bpd six months ago.
Adjusting to lower demand, OPEC kingpin Saudi Arabia has previously said it would be prepared to cut output by half a million bpd in order to tighten supply and reverse sharp price declines.
Analysts at Morgan Stanley believe there are "compelling arguments" on either side when it comes to the OPEC alliance considering whether to implement production cuts from December 6.
However, on balance, analysts at the U.S. bank said in a research note published Friday that the chance of supply cuts were around "2-in-3."
"In that scenario, Brent prices likely recover back into the $70s … On the other hand, in the 1-in-3 probability that OPEC does not come to an agreement, there is still downside to Brent prices, although probably not much below the high-$50s in the next few months."
The oil-rich kingdom's promise of more supply cuts also puts the OPEC and non-OPEC alliance on a potential collision course with the United States.
President Donald Trump is publicly in favor of low fuel prices and has urged the group not to reduce crude production next month.
On Wednesday, the U.S. president publicly thanked Riyadh for helping to keep a lid on oil prices — but again called on the de-facto leader of OPEC to push prices even lower over the coming months.
About two dozen exporting nations began capping their output in 2017 in a bid to drain a global crude glut.
The group relaxed this strategy in June, but in September, some of the world's leading oil producers were talking about pumping extra oil onto the market in order to help soothe intensifying supply shock fears.
No comments:
Post a Comment