Published: Thu, November 15, 2018
Finance | By Loren Pratt

Oil Crashes After Trump Says Prices Should Be 'Much Lower'

Oil Crashes After Trump Says Prices Should Be 'Much Lower'

This in turn has offered a bounce for oil prices with Brent crude jumping 1.4%, potentially establishing a near term bottom. The oil cartel said it would start withholding crude in 2019 to tighten supply and prop up prices.

Why are oil prices falling?

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after USA sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday. The agency raised its forecast for oil output growth from countries outside the Organisation of Petroleum Exporting Countries to 2.4 million bpd this year and 1.9 million bpd next year, versus its previous estimate of 2.2 million bpd and 1.8 million bpd, respectively.

Worldwide benchmark Brent crude oil futures were down 22c at $65.25 a barrel.

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. A relentless rise in crude oil price that took it above $86 a barrel on October 3 was fuelled by fears that U.S. sanctions on Iran may not allow many waivers, leaving Saudi and other producers struggling to fill the gap after significant Iran supply goes out of the market.

Brent is in so-called "bear market" territory alongside U.S. crude as it has fallen by more than 20% since its peak - $86 in early October.

Trump on Monday said he hoped OPEC will not cut production, making it clear he wants oil prices to fall.

The IEA estimates total United States oil supply will rise by 2.1 million bpd this year and another 1.3 million bpd in 2019, from a current record of more than 11 million bpd.

Inventories of oil in OECD countries rose by 12.1 million barrels in September to 2.875 billion barrels, the IEA said, adding that for the third quarter as a whole, stocks rose 58.1 million barrels, or at a rate of 630,000 bpd, the biggest increase since 2015.

"OPEC and Russian Federation are under pressure to reduce current production levels, which is a decision that we expect to be taken at the next OPEC meeting on December 6", said Andersson. Saudi Arabia took the lead to counter the price slide, saying this week that producers needed to cut about 1 million barrels a day, and that it would reduce its own exports by half that amount next month.

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