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OPEC in a ‘Whatever It Takes’ Moment to Prop Up Oil Prices

27 December, 2018, 06:37 | Author: Kristi Dunn
  • India will surpass China as the fastest-growing Asian market for petroleum products in 2018.|PTI

Oil edged back to around $50.50 yesterday but was still about 40pc lower than in October, when prices rose ahead of fresh U.S. sanctions against Iran.

Brent crude oil futures were down 29 cents, or 0.57%, at US$50.18 a barrel and earlier fell to the lowest since July 2017.

Also supporting crude oil prices: The U.S. -China trade dispute unnerved investors and exacerbated worries over global growth.

Meanwhile Brent crude oil futures LCOc1 were down 11 cents or 0.22 percent at $50.36 a barrel, having skidded 6.2 percent in the previous session to $50.47 a barrel, the weakest since August 2017.

Brent fell 11 per cent last week and hit its lowest since September 2017, while United States futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 per cent so far this quarter.

"The main input over the weekend has been the continued intervention by OPEC members", said Olivier Jakob, managing director at Petromatrix. "It's all about equities".

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The prevailing tilt in retail position provides a contrarian view to crowd sentiment as traders go against the broader trend, but a further pullback in the IG Client Sentiment index may largely coincide with a larger rebound in crude oil prices as there appears to be an adjustment in trader behavior. We expect OPEC/non-OPEC producers to reach full compliance with their latest cut by March at the latest.

Wall Street opened higher, lending oil some support. Markets in Britain, Germany and France will remain closed on Wednesday.

The measures might have to include deeper cuts seeing as the 1.2-million-bpd announced by OPEC+ earlier this month failed to impress a market in turmoil. Concerned that a new glut could take shape, Opec and its allies, including Russian Federation, decided earlier this month to return to cutting production in 2019, unwinding a decision taken in June 2018 to pump more oil.

On Monday, Brent crude was down 80 cents, or 1.49 percent, at $53.02 a barrel, after jumping to $54.66 a barrel initially.

"U.S. equity futures are trading a bit firmer this morning triggering some little buying interest in the oil markets", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

While monetary stresses have gauged, the viewpoint isn't as feeble as in 2016 when a supply excess developed, in light of the fact that the Organization of the Petroleum Exporting Countries this time is endeavoring to prop up the market, Jakob said.

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