Oil markets struggle to find footing after 7% slump

Oil markets struggle to find footing after 7% slump

That puts OPEC on a collision course with U.S. President Donald Trump, who publicly supports low oil prices and who has called on OPEC not to cut production. Brent has lost 25 per cent since peaking at a four-year high in early October. "It's getting to the point where it doesn't seem to be about fundamentals anymore, but a total collapse in price", said Phil Flynn, analyst at Price Futures Group. Oil prices have now fallen for 12 consecutive trading sessions.

WTI (oil futures on NYMEX) caught a fresh bid-wave and broke the downside consolidation phase, bouncing almost $ 1 on the latest reports that the OPEC and its allies are reportedly discussing oil supply cut of 1.4 million barrel per day (bpd).

That surge in onshore output has helped overall U.S. crude production hit a record 11.6 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Oil prices have dropped significantly in recent weeks, with the US benchmark price dipping below $60 per barrel, according to Market Watch. As of last week, hedge funds and other money managers had reduced their long position in oil contracts to their lowest since August 2017.

Brent dropped $4.03, or 5.8 per cent, to $66.09 a barrel.

Crude prices are influenced by several variables such as speculation on oil trades (known as futures), inventory levels, geopolitics, global economic growth and the relationship between global supply and demand.

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"They can't make up their minds on a cutback or not", said Mr Bob Yawger, director of energy futures at Mizuho.

Saudi Energy Minister Khalid al-Falih said on Monday the Organization of the Petroleum Exporting Countries agreed there was a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to prevent oversupply.

OPEC countries have been vocal about steadying prices by announcing a production cut to the tune of 1 mb/day as early as December.

Demand for its crude will be about 31.5 million bpd, which is 500,000 bpd less than its forecast two months ago and 1.4 million bpd below current output, Opec said this week. In addition, Russian Federation has given mixed signals about a cut, with Lukoil CEO Vagit Alekperov saying Monday he did not see cuts being necessary. "These unusual bedfellows no longer seem like they're in the same bed anymore".

Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown, as seen with the economic contractions in powerhouses Japan and Germany during the third quarter as well as in China's falling auto sales.

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