Published: Thu, December 06, 2018
Economy | By

Volatile Oil Prices With High Production And Low Demand

Volatile Oil Prices With High Production And Low Demand

Towards the end of last week the crude oil market received another setback as its prices in the United States plummeted by almost 7 % and sank into a bear market that made vehicle owners a happy lot but set alarm bells ringing among investors. This increase in the country's oil inventory was fed by increasing oil imports. U.S. West Texas Intermediate crude fell 42 cents to $51.14 U.S.

"This is effectively an achievement of Saudi Arabia and the crown prince, he was the initiator of this work", Putin told an investment conference in Moscow on Wednesday. This will reduce oil supply by 1.4 million barrels per day.

"Options traders remain focused on downside risks following a 30 percent slide in WTI", Erik Norland, senior economist at commodities exchange CME Group wrote in a note, referring to the higher number of traders who have placed positions that would profit from a further fall in crude prices than those placing bets on a rising market.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members will meet in Vienna, Austria on December 6 to discuss a new round of production cuts of 1 million to 1.4 million barrels per day (bpd) and possibly more, OPEC delegates told Reuters earlier this month. Wise stated that that would depend on the severity of cuts adopted by OPEC and its allies.

Oil prices edged up on Thursday on optimism that trade talks at the upcoming G20 meeting could help the global economy and improve demand, but gains were curbed after US crude inventories hit their highest in a year.

Saudi Arabia is not happy at all with Brent Crude at $60-it needs much higher prices, probably closer to $80, to balance its budget.

While most analysts expect some form of supply cut from the OPEC meeting, sentiment in oil markets remains negative.

Adding to the uncertainty in the oil markets were President Vladimir Putin's comments. Both contracts are up about 1 percent this week, the first weekly gains in nearly two months. Gasoline futures prices dropped by 1.6% to trade at $1.3979 per gallon.

Data released Wednesday by the U.S. Energy Information Administration showed that U.S. crude stockpiles rose by 3.6 million barrels in the week through November 23, compared with analysts' expectations for an increase of 769,000 barrels. This sudden turn of events has surprised market analysts who were anxious about prices hitting $100 per barrel and are now faced with sudden price collapse. The expectation had been that as maintenance in refineries began to wind down for the year, the market would see more draws.

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