Markets wary on trade woes as oil prices rise

Kenny Grant
November 20, 2018

Oil futures fell about 1 percent on Monday amid global oversupply worries, but losses were muted as investors eyed potential sanctions on Iran from the European Union, a possible production cut from OPEC and slightly bullish storage drawdown in U.S. crude stocks.

U.S. West Texas Intermediate (WTI) crude futures, were up 61 cents, or 1.1 percent, at $57.07 per barrel.

While Saudi Arabia's Energy Minister Khalid al-Falih says that based on the OPEC+ group technical analysis, "there will need to be a reduction of supply from October levels approaching a million barrels", reports emerged last week that Russian Federation would rather stay out of any fresh oil production cuts led by the Saudis.

As the news agency informs, "Brent crude futures were down 6 cents at $66.70 a barrel by 1243 GMT, while USA futures were up 3 cents at $56.49".

The market is struggling to find firm footing after a rout that has seen prices fall more than $20 a barrel since early October on global oversupply fears.

A weak demand outlook, waivers on sanctioned Iranian crude and high USA production has pushed oil into a bear market.

Alexander Novak, Russian Energy Minister, stated that Russia, which is not an OPEC member, meant to sign a partnership agreement with the group.

The market pared losses early in the US trading day when energy information provider Genscape reported that crude inventories fell in the latest week, traders said.

The September export figure was a 219,000 b/d rise from September and the highest since January 2017's 7.713 million b/d, in the first month that OPEC instituted its production cuts.

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This is as much to grab the Asia market space vacated by lower Iranian supplies as to influence a higher drawdown from the USA strategic reserves and bolster market sentiment - and prices.

U.S. crude stockpiles have grown for eight straight weeks, and data last week showed inventories swelled by the most in more than a year, weighing on the market.

Brent is nearly 25 percent below early October's 2018 peak of $86.74, as evidence of slowing demand has materialized and output from the United States, Russia and Saudi Arabia hit historic highs.

A trade war between the United States and China has made investors warier about the outlook for oil demand growth.

The speculator group cut its combined futures and options positions on USA and Brent crude during the week ended November 13 to the lowest since June 27, 2017.

Portfolio managers have sold the equivalent of 553 million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.

WTI may even test the low of $54.72 per barrel it hit back in February, Thorpe said.

"The main trend remains bearish as investors no longer believe in a risk of supply tightness for crude", ActivTrades chief analyst Carlo Alberto De Casa said.

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