Oil price made slight gain yesterday ahead of scheduled December meeting of the Organisation of Petroleum Exporting Countries, (OPEC) next week at which the producer club is expected to decide some form of supply cut to counter an emerging glut.
Market reaction to that shows the U.S. West Texas Intermediate (WTI) crude futures climbing to $51.88 per barrel up 32 cents, or 0.6 per cent from their last settlement, while the International Brent crude oil futures were up 44 cents, or 0.7 per cent, at $60.65 per barrel.
Despite yesterday’s rise, oil prices have still lost almost a third of their value since early October, weighed down by an emerging supply overhang and by widespread weakness in financial markets. The crude oil price slump since October is so far on par with the 2008 price crash and steeper than that of 2014/2015.
OPEC will meet at its headquarters in Vienna, Austria, on December 6 to discuss output policy. The OPEC-meeting will follow a gathering by the Group of 20 (G20) nations, which includes the world’s biggest economies, in Argentina this weekend, at which the Sino-American trade dispute as well as oil policy are expected to be discussed.
While most analysts expect some form of supply cut from the OPEC-meeting, sentiment in oil markets remains negative.
“Options traders remain focused on downside risks following a 30 percent slide in WTI,” Erik Norland, senior economist at commodities exchange CME Group wrote in a note, referring to the higher number of traders who have placed positions that would profit from a further fall in crude prices than those placing bets on a rising market.
Portfolio managers have slashed their combined net long position in crude futures by a total of 607 million barrels over the last eight weeks, the largest reduction over a comparable period since at least 2013, when the current data series began, exchange data showed.
A concern to global markets is a slowdown in global trade as a result of the Sino-American trade dispute, swelling debt and a strong dollar that puts pressure on emerging markets. The World Trade Organization (WTO) said in its latest outlook, published on Tuesday, that “trade growth is likely to slow further into the fourth quarter of 2018”, with growth likely at its slowest since October 2016.
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