Oil Stocks to Gain from OPEC Production Cuts

Oil Stocks to Gain from OPEC Production Cuts

Major emerging economies like India, Indonesia and Turkey came under strong pressure ealier this year as their currencies slumped against the dollar just as oil prices surged, eroding demand. Weaker global economic growth "could lead to widening the gap between supply and demand".

Oil slumped into a bear market last week, as fears of a supply glut deepened on USA waivers for some buyers of Iranian oil, as well as rising inventories and record production in America. At the same time, the Associated Press reports, discussions have started with Russian Federation to curb the global supply of crude seeing as Iran sanctions failed to lift prices. "We're seeing some signs of this coming out of the U.S. We have not seen the signs globally, nor can we predict that they will persist until 2019".

That means USA producers have ramped up output even though many of them have been getting less than $60 per barrel for most of the year, far below the global market price of oil.

However, with the Trump administration offering waivers and allowing eight big oil importers to continue buying Iranian oil, and the consistent increase in USA crude inventories have been dragging down oil prices since October 29.

Saudi Arabia, the world's largest oil exporter, said on Sunday it would cut its shipments by half a million barrels per day in December due to seasonal lower demand.

Olicer Jakob, an analyst of Petromatrix, was quoted by Reuters, on this increase in the value of the Brent and American crudes.

US gasoline inventories increased by 1.9 million barrels, while distillate fuel inventories decreased by 3.5 million barrels, EIA said.

Brent LCOc1 ended down $4.65, or 6.6 percent, to $65.47 a barrel, the largest one-day loss since July. USA crude oil exports averaged 2.4 million barrels per day, down by 80,000 barrels per day from the previous week.

The Saudis appear to be striking a fine balance, on the one hand saying there's no need to panic and insisting the market isn't as oversupplied as some bearish investors claim, and on the other starting to reduce production unilaterally.

Falih said Saudi Arabia was not preparing for a breakup of the Organization of the Petroleum Exporting Countries and believed the group would long remain the global central bank for oil.

Trump tweeted, "Hopefully, Saudi Arabia and OPEC will not be cutting oil production".

US crude oil production increased at a faster rate than EIA previously anticipated, putting further downward pressure on crude oil prices. According to Oilprice.com, U.S. shale production saw an increase of 400,000 bpd in the first week of November, pushing output up to 11.6 million barrels per day. Falih on Monday said inventories had been building up, adding that "the 25 producers will not allow this to continue" and that they had signalled they would do "whatever it takes to balance the market".

"If you are a producer in Texas, you have to be happy with the fact that there is a swing supplier in the market that wants to keep prices supported", said Matt Smith, director of commodity research at ClipperData.

Senate Minority Leader Chuck Schumer, a New York Democrat, had previously supported legislation that would remove an existing immunity shield that prevents the oil cartel and its members' national oil companies from being sued under USA antitrust law.

Meanwhile, the market will focus on the news of any meeting between officials from China and the United States aiming at seeking solution to the ongoing trade tensions.

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