Oil price: Commodity under pressure after huge drop Tuesday

Posted November 16, 2018

USA crude stocks climbed by 7.8-million barrels in the week ending November 2 to 432-million as refineries cut output, data from industry group the American Petroleum Institute (API) showed on Tuesday.

In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive reduction in its forecast.

A steep slide in oil prices has surprised many oil market participants.

If the so-called OPEC+ group agrees again to reduce output, the baseline should be a recent production level, Saudi Energy Minister Khalid Al-Falih said when ministers met on November 11 in Abu Dhabi.

President Donald Trump put pressure on OPEC not to cut supply to prop up the market. U.S.

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The oil market had already been under pressure since the beginning of October amid trade tensions and concerns over rising interest rates.

"Maybe some of the fears of extra supplies and reduced demand have finally been priced into the market, but I wouldn't say that a bottom has set in yet". The country's crude output is expected to average 12.06 million bpd in 2019, passing 12 million bpd sooner than expected on surging shale supply, the U.S. Energy Information Administration said this month. "The products are definitely supporting us right now".

"While renewed speculation about output curbs and increased financial sanctions on Russian Federation pose risks to the outlook, we expect crude and condensate production to average 11.2 mb/d this year, rising to 11.5 mb/d next year", the report read.

The collapse in oil prices has now reached historic levels.

Iranian oil industry has been under pressure from the USA efforts to isolate the country by reimposing sanctions. "Oil prices should be much lower based on supply", Trump tweeted. The IEA estimates total U.S. oil supply will rise by 2.1 million bpd this year and another 1.3 million bpd in 2019, from a current record of more than 11 million bpd.

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While the larger-than-expected crude build was "shocking", the drops in refined product supplies helped buoy prices, said Phil Flynn, analyst at Price Futures Group in Chicago.

He said emerging concerns about weak global demand, rising United States production, and speculators rapidly bailing out of long positions were primary factors for the drop.

Tuesday's seven-percent drop was due to ongoing worries about weakening global demand and oversupply.

The price increases came after a trading session on Tuesday when oil lost as much as 7% of its value and seem related to a report from Reuters that the OPEC cartel of oil producers and its partners were discussing cutting oil output by up to 1.4 million barrels a day. Nervous oil traders have not even been calmed by Saudi Arabian efforts to cut shipments by a half million barrels a day.

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