Oil prices fall as OPEC meeting begins

Mae Love
December 6, 2018

"I'm cautiously optimistic that a deal gets done, but the devil will be in the detail", said Mohammad Darwazah, a director at Medley Global Advisers.

Moscow has shown willingness to cooperate with OPEC to cut oil production.

Oil demand is still expected to be "robust" according to the World Bank's report, which cited the International Energy Agency forecast of a 1.4 million barrels per day increase.

In the Middle East, Saudi Arabia produced a record 11.3 million barrels per day (bpd) in November, adding to the swelling glut.

Oil prices have extended losses as US President Donald Trump once again tried to dampen OPEC's efforts to tackle falling oil prices amid market expectations on further output cut.

A day of talks in the Austrian capital on Wednesday concluded with a panel led by Saudi Arabia and Russian Federation - the group's most powerful members - recommending an output reduction lasting six months, Oman's Oil Minister Mohammed Al Rumhy told reporters.

Riyadh wants Moscow to contribute at least 250,000-300,000 bpd to the cut but Russian Federation insists the quantity should be only half of that, OPEC and non-OPEC sources said. Their summit begins Thursday.

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The Trump administration has sought to maintain oil production to avoid a run-up in prices as it tightens sanctions preventing Iran from exporting crude.

Russia, Saudi Arabia and the United States have been vying for the position of top crude producer in recent years.

The United States is not part of any output-limiting initiative due to its strict anti-trust legislation and fragmented oil industry.

However, when oil producers realized the sanctions fell far short of what had been expected, fears of oversupply followed.

Traders said oil prices were being weighed down by weak global financial markets, which saw stock markets tumble on Thursday. Trump wrote in a tweet on Wednesday.

In a sign of easing tensions between the world's two biggest economies, Chinese oil trader Unipec plans to resume United States crude shipments to China by March after the Xi-Trump deal at the G20 meeting reduced the risk of tariffs being imposed on these imports, people with knowledge of the matter said.

Possibly complicating any OPEC decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. Libya and Nigeria, which were exempt from making cuts in the 2016 deal that created the OPEC+ group, have accepted that they will have to participate this time, said Al Rumhy.

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