The decline of US crude continues as it hits its lowest price since December of last year. Brent is below $70 a barrel, while U.S. crude sits below $60 as the sell-off continues. Saudi Arabia has issued a statement advising the need to cut production by a huge 1 million barrels per day. The US has asked for production not to be cut. This latest drop means US crude has declined for the 11th straight session.
U.S. President Donald Trump put pressure on OPEC not to cut supply to prop up the market. U.S. light crude fell $2.15, or 3.7 per cent, to $57.78, hitting its lowest level since December 2017. Both crude benchmarks have dropped as much as 20 per cent since peaking at four-year highs in early October. “The market now increasingly looks concerned about the prospect of too much supply,” said Norbert Ruecker, head of macro and commodity research at Swiss bank Julius Baer. “Hedge funds and other speculative (investors) have swiftly changed from the long to the short side.”
Saudi Arabia has shown concern as supply has started to outpace consumption, fearing a repeat of a glut that brought a price crash in 2014. Saudi Energy Minister Khalid al-Falih said on Monday OPEC agreed there was a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to prevent oversupply. On Tuesday, OPEC cut its forecast for oil demand growth in 2019 for the fourth consecutive month. The producer group said growth in supplies from non-OPEC countries would outpace growth in demand, “leading to widening excess supply in the market.”
“The oil market is in for volatile times. Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” the president said in a Twitter post on Monday. “This tweet certainly did not help prices,” ING commodities strategist Warren Patterson said. American shale fields have pushed U.S. oil production to all-time highs this year with crude output now at 11.6 million bpd, helping make the United States self-sufficient in energy.
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