Oil Rises After Russia Leans Towards Output Cut

Randal Sanchez
December 1, 2018

According to Reuters, Moscow intends to reduce oil production gradually, and at the moment it is trading with Saudi Arabia with respect to time and volume reduction.

The organisation sets production volume to meet the demand for oil in negotiation with countries outside OPEC, such as the United States and Russian Federation. Russian Federation is the second-largest oil-producing country.

Attention later in the session will focus on the new round of US inventory data to see if it reinforces expectations of an emerging supply glut. This indicates at a possible trench being created by the oil marketing companies to form a buffer in case the oil prices increase again.

Oil prices on both sides of the Atlantic reversed the Asian gains and fell sharply in the European trading this Thursday, with the U.S. oil (WTI) tracking the losses in its European peer, Brent.

Since early October, both crude benchmarks have lost nearly a third in value as an emerging supply glut weighs on markets, as production has surged in the United States, Russia and also by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC). The price also broke a crucial bearish trend line with resistance at $51.15 on the hourly chart. This is the first declining trend since February 2016, the lowest price level in the last decade. It tested the broken trend line, the 50 hourly SMA, and the 38.2% Fib retracement level of the recent wave from the $49.49 low to $52.21 high.

NY oil sank to under $50 on Thursday owing to doubts over an Organisation of Petroleum Exporting Countries (OPEC) output cut, while most stocks rose as the Federal Reserve hinted at a softer pace of interest rate hikes. Russian Energy Minister Alexander Novak said current crude prices are acceptable and the nation's oil output will hold steady until the end of the year. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many U.S. politicians to impose stiff sanctions on Riyadh.

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However, one of the most important determinants of oil prices is OPEC.

A director with Tortoise, Nick Holmes, who manages a portfolio in energy that is over $16 billion, this report shows an increased build in relation to the market consensus on crude stockpiles in the US.

Putin also thanked Saudi Arabia and its Crown Prince for the OPEC-Russia cooperation in managing the oil market. "As Saudi Arabia we can not do it alone, we will not do it alone".

"I'm surprised because stock markets rallied yesterday, because the dollar weakened and that should provide some sort of support for oil, but at the same time, I'm not surprised because the Saudi energy minister said yesterday they won't be the only one to cut (output) and even Putin has said he's happy with oil prices at $60".

"A credible message from OPEC's December 6 meeting is critical for price support", Jefferies said.

Oil prices achieved one per cent gain yesterday clawing back some ground from losses in the previous session, but an increase in USA crude inventories and uncertainty in the run to an Organisation of Petroleum Exporting Countries (OPEC) meeting next week kept markets under pressure.

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