Oil reaches its lowest level in 2018, OPEC should reduce its spending

SINGAPORE (Reuters) – Oil prices collapsed at 2018 on Friday, causing a drop in the supply of crude, in a sluggish economic climate.

The fall came as markets were waiting for the Organization of the Petroleum Exporting Countries (OPEC) to begin with their supplies after a meeting on December 6.

The international benchmark Brent crude oil futures contract reached its lowest level since December 2017, at $ 61.52 per barrel, before recovering to $ 61.88 at around 6:02 am GMT. That was still 72 cents, or 1.2 percent less than their last close.

Futures on US crude WTI (West Texas Intermediate) fell 2.5% to $ 53.29 a barrel, after reaching less than 5 cents from a low of October 2017 hit earlier during the week.

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.

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)