Oil prices slumped more than 6 percent to the lowest in more than a year
on Friday amid fears of a supply glut even as major producers consider
cutting output.
Oil supply, led by US producers, is growing faster than demand and to prevent a build-up of unused fuel such as the one that emerged in 2015, the Organization of the Petroleum Exporting Countries is expected to start trimming output after a meeting on December 6.
But this has done little so far to prop up prices, which have dropped more than 20 percent so far in November, in a seven-week streak of losses. Prices were on course for their biggest one-month decline since late 2014.
A trade war between the world’s two biggest economies and oil consumers, the United States and China, have weighed upon the market.
“The market is pricing in an economic slowdown - they are anticipating that the Chinese trade talks are not going to go well,” said Phil Flynn, an analyst at Price Futures Group in Chicago, referring to expected talks next week between US President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires.
“The market doesn’t believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand,” Flynn said.
Brent crude fell $3.13, or 5 percent, to $59.47 a barrel by 1:01 p.m. EST (1801 GMT), after earlier touching $58.41, its lowest since October 2017.
If OPEC decides to cut production at its meeting next month, oil prices could recover, analysts say.
“We expect that OPEC will manage the market in 2019 and assess the probability of an agreement to reduce production at around 2-in-3. In that scenario, Brent prices likely recover back into the $70s,” Morgan Stanley commodities strategists Martijn Rats and Amy Sergeant wrote in a note to clients.
If OPEC does not trim production, prices could head much lower, potentially depreciating toward $50 a barrel, argues Lukman Otunuga, Research Analyst at FXTM.
Read more: Oil plunges to lowest in a year despite potential OPEC cut - Al Arabiya English
Oil supply, led by US producers, is growing faster than demand and to prevent a build-up of unused fuel such as the one that emerged in 2015, the Organization of the Petroleum Exporting Countries is expected to start trimming output after a meeting on December 6.
But this has done little so far to prop up prices, which have dropped more than 20 percent so far in November, in a seven-week streak of losses. Prices were on course for their biggest one-month decline since late 2014.
A trade war between the world’s two biggest economies and oil consumers, the United States and China, have weighed upon the market.
“The market is pricing in an economic slowdown - they are anticipating that the Chinese trade talks are not going to go well,” said Phil Flynn, an analyst at Price Futures Group in Chicago, referring to expected talks next week between US President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires.
“The market doesn’t believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand,” Flynn said.
Brent crude fell $3.13, or 5 percent, to $59.47 a barrel by 1:01 p.m. EST (1801 GMT), after earlier touching $58.41, its lowest since October 2017.
If OPEC decides to cut production at its meeting next month, oil prices could recover, analysts say.
“We expect that OPEC will manage the market in 2019 and assess the probability of an agreement to reduce production at around 2-in-3. In that scenario, Brent prices likely recover back into the $70s,” Morgan Stanley commodities strategists Martijn Rats and Amy Sergeant wrote in a note to clients.
If OPEC does not trim production, prices could head much lower, potentially depreciating toward $50 a barrel, argues Lukman Otunuga, Research Analyst at FXTM.
Read more: Oil plunges to lowest in a year despite potential OPEC cut - Al Arabiya English
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