Published: Tue, December 11, 2018
Money | By Ethel Goodwin

Oil: Market fundamentals are turning more favorable for the price - Danske Bank

Oil: Market fundamentals are turning more favorable for the price - Danske Bank

"OPEC, or more precisely Saudi Arabia, has been the head honcho of the oil world for almost six decades; yet these days it seems unable to make a decision without Russia's blessing, let alone without risking the wrath of the USA president", said Stephen Brennock, an analyst at PVM Oil Associates in London.

That would be a more bullish outcome than Al-Falih had hinted at early in the day, when he said a reduction of about 1 million barrels a day from the entire OPEC+ coalition should be adequate and "certainly we don't want to shock the market".

Crude oil production will be cut by 1.2 million barrels per day from January 2019 for an initial period of six months. In New York last night Brent was...

With potentially higher shale production in the US, combined with non-compliance of some OPEC members and new production elsewhere, a new crisis is brewing. But what made this agreement unusual is the prominent role played by Russian Federation, which is not an OPEC member.

Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali said this in a statement issued following the fifth Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC Ministerial Meeting in Vienna, Austria.

The gathering took place against the backdrop of oil prices having fallen a good 30 percent from more than $86 in early October. OPEC members include Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

Iran, in particular, is facing hard times following renewed sanctions imposed on it by the USA, while Venezuela is grappling with the worse downturn in her economy, just like Libya.

The uncertainty surrounding OPEC/OPEC+ negotiations in Vienna strengthened the overwhelmingly bearish sentiment in oil markets this week, but a larger than expected cut has sent oil prices soaring.

Analysts say that without a substantial cut being announced at today's meeting, that downward pressure will continue.

Optimism surfaced straight away within the oil markets as crude oil prices jumped immediately after the news. The alliance has transformed OPEC into a duopoly in which Russian Federation, which isn't a formal member of the cartel but part of the production-cuts alliance, is asserting its power.

USA crude exports are poised to rise even further, with new pipelines from the Permian in the works and at least nine terminals planned that will be capable of loading supertankers.

Production from the US, Russia and OPEC nations grew by more than three million bpd in 2018 - the majority of the gain a result of US output growth. The oil price selloff was in part caused by Trump's tweets and inaction on Iranian sanctions.

Competition to Brent from US shale output has weighed on prices at a time when financial markets are anxious about the health of the global economy and the fallout of the US-China trade war.

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