Oil continues to slip on rising supply

Oil continues to slip on rising supply

Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday.

By about 8:20 a.m. ET, the price of West Texas Intermediate, the United States benchmark, was trading at $56.27 a barrel, a gain of 1.04%, while Brent crude, the worldwide benchmark, was up 1.3% at $66.31. An industry report was said to show United States stockpiles rose 8.8 million barrels last week, more than double the increase forecast in a Bloomberg survey before government data due on Thursday.

The Indian market too welcomed the fall in global oil prices and opened higher today.

President Vladimir Putin said he discussed the price of oil with USA counterpart Donald Trump when they met in Paris briefly on Sunday, adding that Russian Federation is happy with current prices.

Meanwhile, cartel President Suhail Al Mazrouei said Wednesday that supplies will be curtailed as needed to balance the market.

Anxious by a drop in oil prices and rising supplies, the Organization of the Petroleum Exporting Countries is talking again of reducing production just months after increasing it.

Even as the Saudis floated the possibility of a cut in production, the selling has not abated.

At the same time, supply has been surging amid a massive increase in U.S crude oil production.

Official storage data is due on Wednesday from the Energy Information Administration, with analysts expecting a 3 million barrel rise in crude inventories. The persistent has also been linked to the growing concerns and warnings from the IEA and OPEC over a supply glut, heading into 2019. Every dollar per barrel change in crude oil prices impacts the import bill by Rs 823 crore ($0.13 billion).

The report by the International Energy Agency also showed that the countries of the Organization of the Petroleum Exporting Countries (OPEC) were 105-per cent compliant with the deal on oil output freeze in October.

Financial firms hedging the risk incurred by selling put options to oil producers generated added downward pressure when prices fell toward option strikes, Goldman Sachs said in a note. He's kept at it even as prices have plunged, tweeting on November 12 that he hoped Saudi Arabia and OPEC wouldn't cut output.

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.

Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since a price collapse in 2014.

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