Oil drops to its lowest level since the end of 2017 due to overabundance of emerging supply, OPEC is expected to reduce

SINGAPORE (Reuters) – Oil prices tumbled to their lowest since late 2017 on Friday in a stormy trading climate, penalized by an emerging surplus of crude supply and a worsening economic outlook.

To counter the sharp increase in supply, the Organization of the Petroleum Exporting Countries (OPEC) is expected to start retaining production after a meeting scheduled for December 6th.

The international benchmark Brent crude oil futures fell to its lowest level since December 2017, at $ 61.52 per barrel, before rising to $ 62.13 at 7:41 am GMT. That was 47 cents, or 0.8 percent less than their last close.

Futures on US crude WTI (West Texas Intermediate) fell 2.3% to 53.38 dollars a barrel. Previous prices fell to 52.82 dollars, just 5 cents on the level of 52.77 dollars reached Tuesday, which was the lowest since October 2017.

In the midst of the crisis, Brent and WTI price volatility rose sharply in November to levels not seen since the 2014-16 market crash and, prior to that, the 2008-09 financial crisis.

(Chart: volatility of oil prices rose – tmsnrt.rs/2PO4r3S)

The divergence between US crude and international crude comes from the fact that supply in North America is obstructing the system and depressing prices, while global markets are a little tighter, partly because of the reduction in Iranian exports because of the new American sanctions.

Overall, however, global oil supply has increased sharply this year. The top three producers – the United States, Russia and Saudi Arabia – pumped more than a third of global consumption, to about 100 million barrels a day.

"The market is currently oversupplied," said Friday the US investment bank Jefferies, adding that "an oversupplied market is having trouble setting a floor (price)".

High output occurs as demand prospects weaken as a result of a global economic downturn.

Shanghai shares fell the most in Friday, down 2.5%, due to concern over China's economic growth and doubts about President Xi Jingping's and US President Donald Trump's chances of defuse the Sino-US trade war. next week.

Oil prices have fallen by about 30% since their last highs in early October, as global production began to exceed consumption in the fourth quarter of this year, ending a period of under-supply that began in the first quarter. of 2017, according to Refinitiv data. Eikon.

Saudi Arabia, the leading exporter of crude oil, adjusted to lower demand and announced Thursday a reduction in its supply.

"We will not sell oil that our customers do not need," Saudi Energy Minister Khalid al-Falih told reporters.

Saudi Arabia urges OPEC to reduce its oil reserves by up to 1.4 million b / d in order to avoid an overabundance of its reserves.

The group officially meets on December 6 to discuss its procurement policy.

US bank Morgan Stanley said it sees "a much greater likelihood that OPEC will reach an agreement to balance the market in 2019," adding that this would likely support oil prices "at 50". US $, at least in the short term.

(Chart: World balance of supply and demand of crude oil – tmsnrt.rs/2PKtzIy)