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LOCATION : HOME > Industry News > Oil regains ground as capacity warnings counter Russia questions

Oil regains ground as capacity warnings counter Russia questions

Pubdate:2018-11-20 11:41:16 Source: ALEX NUSSBAUM Click: 618 times

NEW YORK CITY (Bloomberg) — Oil prices regained ground after an earlier slide, as traders weighed countervailing signals about how much OPEC and its allies can afford to trim production.

Futures in New York climbed less than 1%, after reversing direction multiple times Monday, as the International Energy Agency noted that spare output capacity in Saudi Arabia remains low. Russian Energy Minister Alexander Novak, meanwhile, said producers need to better understand current conditions before agreeing to slash supplies, leaving the plan for major producers uncertain.

“You had the IEA reminding everyone that we still are fairly tight on spare capacity,” said Ashley Petersen, an oil analyst at Stratas Advisors in New York. “It’s a bit of a slow news week so oil markets are going to latch onto anything they hear.”

While crude markets are currently well supplied, extra capacity in Saudi Arabia, OPEC’s leading producer, remains “very thin,” IEA Executive Director Fatih Birol said Monday while attending a conference in Slovakia. Longer term, “cutting the production significantly today by key oil producers may have some negative implications for the markets.”

Russia’s wait-and-see approach threatened to open up a gap with Saudi Arabia, its partner in orchestrating suppliers to stabilize crude prices in recent years. The Saudis said earlier this month that producers may have to cut as much as 1 MMbpd to resuscitate a market that’s fallen into bear territory. U.S. benchmark crude notched its sixth straight week of losses last week.

OPEC ministers are scheduled to meet in Vienna on Dec. 6, with allies from outside the group joining talks the next day. In Moscow on Monday, Novak said he wants them to “make a balanced decision, and so far there are no criteria for it.”

“The statements from Russia have turned the market’s attention back to worries about slowing demand growth and excess supply and that’s why we’re under pressure,” said Gene McGillian, senior analyst and broker at Tradition Energy in Stamford, Connecticut. “It looks as if some of the bear pressure in the market has taken hold again.”

A strengthening U.S. dollar also added to the downdraft on crude and other commodities denominated in the greenback. With rising trade tensions threatening the economy in emerging markets, the Bloomberg Dollar Spot Index rose as much as 0.2% on Monday.

West Texas Intermediate for December delivery, which expires Monday, edged up 5 cents to $56.51/bbl on the New York Mercantile Exchange at 1 p.m. local time. Total volume traded was 12% above the 100-day average. The more active January contract gained 11 cents to $56.79.

Brent for January settlement slid 39 cents, or .06%, to $66.37/bbl on London’s ICE Futures Europe exchange, and traded at a $9.64 premium to WTI for the same month.

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