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Global Crude Prices Reach Lowest Since December 2017 As Slump Continues

Global Crude Prices Reach Lowest Since December 2017 As Slump Continues
Concerns over an emerging over supply in the market and the bleak forecast cause global oil prices to drop to its lowest in seven months on Friday.
The fall has made the prospect of a production cut by the Organization of the Petroleum Exporting Countries (OPEC) an eventuality after the members of the oil cartel meet together for a meeting early next month. 
The international benchmark Brent crude oil futures dropped to its lowest since December 2017 before recovering somewhat to settle at $61.88 which was still 72 cents, or 1.2 per cent below their last close.
There was a drop of 2.4 per cent in the price of U.S. West Texas Intermediate (WTI) crude futures to settle at $53.29 a barrel after it reached just 5 cents over the lowest price since October 2017 earlier in the week.
While the oil dropped, there has been a jump in the Brent and WTI price volatility for November to levels that have not been witnessed since the price debacle of 2014-2016 and during the financial crisis of 2008-2009.
The US oil supply is being clogged resulting in a drop in prices there because of surging North American supply which has created a divergence between U.S. and international crude. The conditions in the global markets are somewhat tighter than that in the US partly because of lower exports of oil from Iran because of the US sanctions imposed on Tehran earlier this month.
On the overall however, there has been an increase in supply of crude in the global market so far this year because of increasing production by the to[p three global producers - the United States, Russia and Saudi Arabia. The three countries together produced over a third of the about 100 million barrels per day (bpd) global production rate currently.
"The market is currently oversupplied," said U.S. investment bank Jefferies on Friday, adding that "an oversupplied market has a difficult time setting a (price) floor."
There are forecast of a global slowdown in oil demand due to slowness of the global economy which has been compounded by the higher production.
Since the peaks reached by global crude prices in early October, there has been a drop of about 30 per cent in the prices as global demand slowed while production was increased thereby creating an imbalance between demand and supply and hence consumption was fell below supply in the fourth quarter of this year. According to data in Refinitiv Eikonm this apparently brought to an end a period of under-supply which had began since the first quarter of 2017.
It may reduce supply, Saudi Arabia said on Thursday as it sought to adjusting to lower demand.
"We will not sell oil that customers don't need," said Saudi Energy Minister Khalid al-Falih.
Opec is being pushed to again cut production by Saudi Arabia by as much as 1.4 million bpd to avoid a supply glut.
According to estimates of the U.S. bank Morgan Stanley, it saw "a far greater probability that OPEC reaches an agreement to balance the market in 2019" than not, adding that this would likely support oil prices "in the high-$50s, at least near term."

Christopher J. Mitchell

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