Brent crude oil rises after supply cut agreement

13 December, 2018, 22:56 | Author: Frank Williams
  • US investment banks see low oil prices despite OPEC cut

The global benchmark Brent crude was trading at $62.06 per barrel with a 0.6 percent gain at 0610 GMT, after closing Friday at $61.67 a barrel, while the American benchmark West Texas Intermediate was up 0.3 percent at $52.55 a barrel.

Organisation of the Petroleum Exporting Countries (Opec) and some non-Opec producers made a decision to cut output by 1.2 million barrels per day for six months from January after world prices shed a quarter of their value in just a few weeks.

"U.S. oil production growth continues relentlessly and will probably continue for the foreseeable future to offset any supply-side adjustments from the OPEC+ group", Razaqzada said.

Despite efforts by the OPEC-led group including Russian Federation to stabilize prices, the early price action suggests bullish investors aren't happy with the final cut of 1.2 million bpd.

The new agreement set the grounds for cutting overall oil production by 800,000 barrels per day by OPEC nations throughout the first six months of 2019.

US bank Morgan Stanley said the cut was "likely sufficient to balance the market in 1H19 and prevent inventories from building".

He appreciated the decision of the OPEC + countries to regulate the oil market and stabilize the oil prices.

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"We believe oil prices will resume their path back up to $70 average next year, potentially higher in the second quarter for a brief spell of time".

Oil market watchers have been closely monitoring the situation to determine how the oil production cut will affect the oil prices, which is expected to soar for fiscal year 2019, according to some analysts.

Crude has slumped about 30 percent from a four-year high in early October, with volatility reaching the highest level in more than two years last month.

He disclosed that his country would reduce oil supplies by 2.5% in January compared to the level of October.

Iran, Libya and Venezuela are excluded from the reduction of oil production arrangement. The slower economic growth is expected to influence the demand for oil next year and along with the growing production in the USA, the prices are estimated to decline eventually.

OPEC heavyweight Saudi Arabia, the world's biggest crude oil exporter, will carry most of the burden by lowering its output by 500,000 bpd.

Despite the cuts, that was still a price forecast reduction of $6 per barrel as Bernstein lowered its crude oil demand forecast from 1.5 million bpd previously to 1.3 million bpd for 2019.

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