The fall in oil prices was a record for 10 years

Roman Schwartz
December 3, 2018

The biggest snag in OPEC's push for a consensus on cutting oil output could come from relentless growth in supply from its second-biggest producer.

Saudi Arabia led suppliers to cut production two years ago to curb a glut, then reversed course in June on concerns that US sanctions on Iran could create a shortage.

Oil prices jumped by more than 5 percent on Monday after the United States and China agreed to a 90-day truce in a trade dispute, and ahead of a meeting this week of the producer club OPEC that is expected to cut supply. Iraq, which objected to output limits in 2016, may dig in its heels again.

OPEC's President and the United Arab Emirates Energy Minister Suhail Al Mazrouei, said he was optimistic OPEC+ will reach an agreement in Vienna over a cut in production for 2019. "Iraq needs the revenue". USA midcontinent refiners that receive WCS include Marathon, Flint Hills and BP, and they too have seen better margins than their US competitors. Its citizens continue to endure power outages and inadequate access to clean water. They also recommended a cut of around 1.3 million barrels a day from October levels. The comments open the door for a deal at the OPEC meeting next week in Vienna. Then, after a period, Iraq "will likely keep raising output quietly", he said.

While the government's move is probably welcomed by independent producers, integrated oil companies like Cenovus, Husky Energy and Imperial (which is owned by Exxon Mobil) have benefited from the low-priced of crude flowing to their refineries and driving up refining margins. Last week, Alberta's government promised to buy about 80 locomotives and 7,000 rail cars to help move the crude out of the oil sands region and to market, but that won't drain the surplus supply very quickly and won't do much to get WCS prices back up.

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Some Democrats, however, could vote "present" instead of voting for either Pelosi or incoming Republican Leader Kevin McCarthy. Nancy Pelosi, the Democratic leader, was flanked by newly elected freshmen when introducing the bill on Friday.

At last week's G20 meeting in Buenos Aires, Saudi Arabia and Russian Federation agreed to extend their crude oil production cuts in an effort to raise the price of benchmark Brent crude back to around $70 a barrel, about $10 higher than it traded for on Friday.

"We are going to survey together the market situation with Saudi Arabia and respond to it operationally", he said.

Last Thursday, the prices of crude oil clawed back its losses after the release of reports that Russian Federation has accepted the necessity to reduce its output.

Iraq resumed pumping crude this month on a test basis through a Kurdish-controlled pipeline to Turkey, according to an oil ministry spokesman.

Brent for February settlement rose as much as 5.3 percent to $62.60 a barrel on London's ICE Futures Europe exchange. They've been exempt from the group's cuts agreement and are unlikely to welcome a decision to include them in any new cuts, Petromatrix's Jakob said.

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