Published: Fri, November 30, 2018
Markets | By Otis Pena

Oil drops below $50 for first time in a year

Oil drops below $50 for first time in a year

All eyes are on this weekend's G20 summit in Argentina, where Russia's Vladimir Putin and Saudi Arabia's Mohammed bin Salman are likely to discuss how to coordinate oil policy, but both leaders have reasons for caution.

For almost a month-since an OPEC/non-OPEC panel signaled that there might be a need to cut oil production by 1 million bpd to balance the market-Russia has warned against any hasty decisions on new production cuts and has not officially said that a cut is needed. The crown prince, under pressure after the killing of Jamal Khashoggi, can't afford to alienate President Donald Trump.

While Saudi Arabia and its Energy Minister Khalid al-Falih have been airing the idea of a new production cut, Russian Federation has been less convinced that it could take part in another reduction, or at least so it lets the market to believe.

USA crude stockpiles rose last week, the American Petroleum Institute (API) industry group said on Tuesday.

To rein in the glut, ANZ bank said on Friday that OPEC and its main partner Russian Federation were "moving closer to an agreement around further production cuts".

"This led to positive results", Putin said. "I think we are going to have to see the Saudis actively reduce flows to the U.S". Oil has remained in an oversold territory this month, and seesawed near the $50 threshold this week - a key budgetary marker for shale drillers. Total volume traded was 84% above the 100-day average.

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"I'm surprised because stock markets rallied yesterday, because the dollar weakened and that should provide some sort of support for oil, but at the same time, I'm not surprised because the Saudi energy minister said yesterday they won't be the only one to cut (output) and even Putin has said he's happy with oil prices at $60".

Brent crude, the global benchmark, was down 65 cents, or 1.1 percent, at $59.56 a barrel by 9 a.m. ET (1400 GMT), after trading as high as $61.27.

The API said that US crude stocks rose by 3.5 million barrels, more than analysts forecast.

USA commercial crude oil inventories rose by 3.6 million barrels in the week to November 23 to 450.49 million barrels, the Energy Information Administration (EIA) said this week.

The price of Brent has slumped by more than 30 percent from a four-year high above $86 in early October, pressured by concerns that supply will exceed demand in 2019 as economic growth slows. Libya's current oil production is 1.266 million barrels a day, according to Bloomberg calculations based on data from people with knowledge of the situation.

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