Published: Wed, November 14, 2018
Markets | By Otis Pena

Trump tweet snuffs oil rally as OPEC and markets warn of oversupply

Trump tweet snuffs oil rally as OPEC and markets warn of oversupply

OPEC has been making increasingly frequent public statements that it would start withholding crude in 2019 to tighten supply and prop up prices.

In its monthly report, Opec said world oil demand in 2019 would rise by 1.29 million barrels per day (bpd), 70,000 bpd less than predicted last month and the fourth consecutive forecast cut.

Phil Flynn, senior market analyst at Price Futures Group told the news site that the spat between Trump and OPEC was causing tensions in the global market.

USA crude futures lost $3.59, or 6 per cent, to hit $56.35 a barrel, lowest since December 2017, as of 1:45 p.m. EST (1845 GMT), putting it on track for its largest one-day percentage loss since January 2016.

OPEC - led by Saudi Arabia - along with Russian Federation have been burned by previous decisions to refuse production cuts.

Brent Crude has now fallen over 25% since hitting a four-year high in early October, while U.S. oil has lost 28% since its October peak.

West Texas Intermediate for December delivery declined as much as 55 cents to $55.14 a barrel on the New York Mercantile Exchange, before trading unchanged at $55.69 at 12:26 p.m.in Tokyo.

Demand for its crude will be about 31.5 million bpd, which is 500,000 bpd less than its forecast two months ago and 1.4 million bpd below current output, Opec said this week.

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Saudi Energy Minister Khalid al-Falih said on Monday that Opec agreed there was a need to cut oil supply next year by around one million barrels per day from October levels to prevent oversupply.

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

US crude oil output from its seven major shale basins is expected to hit a record of 7.94 million barrels per day (bpd) in December, the US Department of Energy's Energy Information Administration (EIA) said on Tuesday.

"They can't make up their minds on a cutback or not", said Yawger.

Oil prices have dropped significantly in recent weeks, with the US benchmark price dipping below $60 per barrel, according to Market Watch. "These unusual bedfellows no longer seem like they're in the same bed anymore". As of 12:18 p.m. EST, more than 668 million US futures contracts had traded, far exceeding the full-day average of 583 million contracts.

Oil is back in headlines.

Oil showed little sign of recovering from its unprecedented decline as investors flee a market hammered by swelling supplies and a darkening demand outlook.

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