Published: Tue, December 03, 2019
Economy | By

Oil prices surge as Saudi seeks more supply cuts

Oil prices surge as Saudi seeks more supply cuts

Oil prices steadied around $61 a barrel on Tuesday as rising expectations of deeper output cuts from OPEC and its allies were countered by a potential delay to a US-China trade agreement until after the next US presidential election. U.S. West Texas Intermediate (WTI) crude futures rose 30 cents to $56.26 a barrel.

On Sunday, the 1st of December 2019, the Iraqi oil minister, Thamir Ghadhban, said that the OPEC (Organization of Petroleum Exporting Countries), a 14-member pact of crude oil exporting nations alongside its allies were contemplating an option to stretch current output curb by about 400,000 barrels per day to a 1.6 million barrels per day, a comment which would likely to surge crude oil futures' prices on Monday (December 2nd) morning ahead of a meet of OPEC+ nations on December 5th in Vienna, Austria. The contract rose by 1.4 per cent on Monday.

Also, the Saudi government is on the verge of putting out a strategy into the market to woo investors before the initial public offering of its oil company, Saudi Aramco.

"We believe the global oil supply-demand balance requires an extension of the current OPEC+ cuts", Goldman Sachs said in a research note.

The factors behind this view included a large increase in production from legacy non-OPEC projects and an as yet uncertain outlook for demand growth, it added.

Meanwhile, the latest uptick in oil prices can be attributed to fresh selling seen in the US dollar across its main competitors, as the European traders hit their desks and react negatively to the downbeat US data and US President Trump's USD jawboning.

The investment bank said it expected Brent to trade around $60 a barrel in 2020, "absent new growth or geopolitical shocks".

OPEC's de facto leader Saudi Arabia will agree to lower its quota to 10 million bpd from 10.3 million bpd and will press other producers, particularly Iraq, Nigeria and Russian Federation, to improve their compliance with previous commitments, JPMorgan analyst Christyan Malek wrote in the note.

USA crude oil inventories likely declined by 1.8 million barrels last week, according to six analysts polled by Reuters.

Concerns about the inability of the United States and China, the world's two biggest oil users, to reach a preliminary deal to resolve their 17-month trade dispute also weighed on oil prices, along with discouraging USA economic data.

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