Brent plummets as investors fear a new overabundance

NEW YORK (Reuters) – Brent crude futures fell on Monday, under pressure from a growing supply, but corroborated by an announced US oil inventory withdrawal, possible sanctions from the Union. European Union against Iran and possible cuts in OPEC production.

Brent was down 31 cents a barrel at $ 66.45 at 1:26 pm. EST (6:26 pm GMT), above a minimum of 65.27 USD for the session. US crude futures traded 14 cents higher at $ 56.60 per barrel during a session that saw fluctuations in the range of $ 2 per barrel.

Traders said that losses on futures contracts were reduced when the energy information provider, Genscape, announced that crude inventories had fallen over the last week.

EU foreign ministers endorsed the French government's decision to punish Iranian nationals accused of bombing France, three diplomats said. The United States has granted exemptions to certain Iranian oil customers.

The Organization of Petroleum Exporting Countries is pushing allied producers, including Russia, to join production cuts of between 1 million and 1.4 million barrels a day.

Russian Energy Minister Alexander Novak said Russia plans to sign a partnership agreement and details will be discussed at the OPEC meeting in Vienna on 6 December.

"In order for a cup to succeed in supporting the market, they will have to present a front that is not split up and that is less and less likely to come in the run-up to December 6th," said Bob Yawger, Director. of Avenir énergétique at Mizuho in New York.

Although a significant reduction supports crude futures, clear signals from producers are needed, Yawger said. "We have no certainty other than the fact that the market is saturated in the United States and everyone is trying to manage it."

US crude inventories rose for eight consecutive weeks, and last week's data showed that inventories had ballooned for more than a year.

The Brent displays a slump in global demand of nearly $ 86.74 from the peak of October 2018 set for early October 2018, while US production, the Russia and Saudi Arabia reached unprecedented highs.

"Oil prices rose (last week) on the hope of OPEC and its partners, will act to reverse the bearish sentiment, but from a technical point of view, the bearish mode remains intact", said OANDA strategist Stephen Innes.

A trade dispute between the United States and China has made investors more cautious about the prospects for growth in oil demand.

(Chart: US oil drilling points to more production – tmsnrt.rs/2Q97LFW)

This month, fund managers have reduced their upside exposure to futures and gross options to their lows since about mid-2017.

Weekly trading data shows that the portfolio managers hold a combined net long position of approximately 364 million barrels of futures and options on US crude and Brent oil, up from 800 million barrels two months ago.

"The main trend remains bearish as investors no longer believe in a risk of tightening the supply of crude," said Carlo Alberto De Casa, chief analyst at ActivTrades.