Global oil market to lapse into surplus in 2019

Global oil market to lapse into surplus in 2019

OPEC warned on Tuesday that an oil supply glut could emerge in 2019 as the world economy slows and supply from rival producers rises more quickly than expected, building a case for a policy U-turn to cutting output at a meeting December 6.

Global benchmark Brent crude dropped nearly 7% to $65.11 (£50.24) a barrel, its lowest level since March.

OPEC built a case on Tuesday for cutting oil output when it meets next month, warning that a supply glut could emerge in 2019 as the world economy slows and rivals increase production more quickly than expected.

Crude oil has lost more than 25% of its value since early October in what has become one of the biggest declines since prices collapsed in 2014. "Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump's call as much as possible".

It said that it expected "subdued global economic growth" to drive demand even lower than Opec was now forecasting.

"This tweet certainly did not help prices", said Warren Patterson, a senior commodities strategist at ING Bank NV.

OPEC's plans contradict those of US President Donald Trump, who publicly supports low oil prices and wants the cartel not to cut production.

The prices of the United States dollar against the Iranian Rial saw a decline of around 10 percent from the closing hours of trading on Saturday until Wednesday - the end of trading in the week.

The slump in spot prices has turned the entire forward curve for crude oil upside down.

The IEA, in its monthly report, kept its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million barrels per day and 1.4 million bpd, respectively.

The dollar also put pressure on oil, hovering near 16-month highs, making crude more expensive for importers using other currencies. With a trade war between the US and China stoking concerns over the global economy, investors are watching if the Organization of Petroleum Exporting Countries and its allies will pump less. An industry report was said to show USA stockpiles rose 8.8 million barrels last week, more than double the increase forecast in a Bloomberg survey before government data due on Thursday.

Even as the Saudis have promised to reduce output, U.S. production reached 11.6 million bpd in the most recent week, a new record.

In the USA, crude inventories stowed at the key pipeline nexus in Cushing, Oklahoma, rose by an estimated 2.5 million barrels last week, according to a forecast compiled by Bloomberg. The strength in the greenback - which reduces the appeal of commodities priced in the USA currency - may persist if the Federal Reserve raises interest rates again next month as expected, Mizuho's Tsugata said.

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