Economy

Oil Slips As Russia Mulls Production Cuts

Oil Slips As Russia Mulls Production Cuts

USA crude production has been rising, hitting a record in the week ended November.

The group and its allies are considering cutting production by more than 1 million barrels a day as they're increasingly anxious about the potential for oversupply, people familiar with the matter said. Downside risks in the form of slowing demand and rising U.S. shale production has outweighed the upside impact of Iranian sanctions and potential production cuts from OPEC.

West Texas Intermediate for January delivery traded at $57.11 a barrel on the New York Mercantile Exchange, down 9 cents, at 7:29 a.m.in London.

Potential sanctions from the European Union would come as the United States has granted waivers to some of Iran's oil customers, muting the policy's expected impact on global supplies.

Trade tensions between the world's biggest economies escalated over the weekend with U.S. Vice President Mike Pence's attack on China, adding to worries supply may overtake demand.

But OPEC could prove to be the spoilsport as it works on a production cut deal to avoid a looming supply glut, especially with United States shale production rising to record levels. If the grouping agrees to the production cut at its December 6 meeting, it will once again start pinching Indian consumers and give the opposition a handle against the government just when the pitch for general elections will be at its highest. Total volume traded Tuesday was 40 percent above the 100-day average. Light short-covering is behind the moves as some investors adjust positions on the thought that OPEC and its allies may soon announce another round of production cuts to stem the oversupply situation.

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Oil traded near $57 a barrel following six weeks of losses as Russian Federation held off committing to further output curbs, opening up a gap with Saudi Arabia which has called for supply cuts.

Analysts and traders say the oil market rout has deepened due to momentum trading and investors dumping crude futures to buy natural gas contracts.

Meanwhile, drillers in the USA added two more working rigs last week, bringing the total to 888, the highest level since March 2015, according to Baker Hughes data. The official crude inventory data from U.S. Energy Information Administration will be out at 10:30 AM on Wednesday. "Oil market had a lot of noise thrown at it overnight, IEA notwithstanding, but still bounced back, suggesting details of December 6 meeting should provide a stable platform for prices over the near term".

Meanwhile, oil production in the United States is surging.

"Fundamentals over the next six months point to a recovery in oil prices following their sharp decline in October and early November", BNP Paribas said. The S&P 500 Energy Index slumped as much as 3.3%, with all of its members down on the day.


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