In November so far, WTI oil has
slumped 18%. Surging supply and expectations of faltering demand have pressured
crude prices. OPEC said recently in a monthly report that global oil demand in
2019 would rise by 1.29 million barrels a day, 70,000 b/d less than predicted
last month and the fourth consecutive reduction in its forecast.
Worried by the drop in oil prices
and rising supplies, OPEC is talking again of reducing production just months
after having increased it. Such a shift would anger U.S. President Donald
Trump, who urged OPEC not to cut production.
Oil’s slide that has taken it
into a bear market has been exacerbated by a U.S. decision to grant some
nations waivers from its sanctions, allowing them to continue buying some
Iranian crude. Meanwhile, rising American output and inventories are pointing
to an emerging glut and speculation is swirling over whether OPEC and its
allies, including Russia, will act to stem the price slump.
The group reported the worsening
outlook as traders assess mixed signals regarding its next step. Following a
closely watched meeting of OPEC and its allies in Abu Dhabi over the weekend
that yielded no formal change in production policy, a producer committee warned
that they may need ?new strategies.?
Top group member Saudi Arabia
said output needs to be curbed by about 1 million b/d from October levels.
Still, OPEC secondary-source data suggest the kingdom fully abandoned cuts for
the first time in October.
Meanwhile, another key producer,
Russia, signalled it?s not ready to act immediately, with Energy Minister
Alexander Novak highlighting the need to wait and see how the market develops.
Hence, prices have tanked in the
last few days. The momentum from now on looks weak, but, as prices have
contracted nearly 27% from recent highs, the possibility of a technical
bounce-back is not ruled out. MCX crude oil is likely to bounce up in short
term. Hence, we recommend remaining cautiously positive.
The author is Head - Commodity
Research & Advisory, Anand Rathi Commodities.
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Source: Moneycontrol
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