The oil market is mixed this morning as it continues to look for direction and weighs the same news items of the past few months. Those issues continue to be OPEC cuts, U.S. / China trade dispute, concern over a global economic slowdown and increasing U.S. crude production.
Oil markets were up early, then flat and currently trending slightly down in trading Monday morning after comments from the United Arab Emirates energy minister suggested that the global oil market was “correcting” and he “expected everyone” to reduce oil supply under the agreement reached earlier this month in Vienna. Details of that agreement calls for OPEC and its allies to reduce output by 1.2 million barrels per day starting in January 2019. In addition to the OPEC decision, the Canadian province of Alberta mandated a production cut of 8.7% or 325,000 bpd due to limited pipeline capacity in that region. Additional price support was also coming from the latest U.S. rig count data which showed drillers reduced rigs in the week ending December 14 to 873 which was the lowest it’s been since mid-October. “This, when combined with Saudi Arabia is to cut exports to the United States to draw down inventory builds should provide a short term base despite global slowdown fears, which continue to resonate” said one analyst based in Singapore. Without major headlines today some notable things to watch this week are:
Oil prices seem to be looking for a solid footing this morning as news continues to point towards an upcoming supply cut. Oil prices have lost almost a fifth of their value in the last 30 days due to oversupply concerns, signs of decreasing demand growth and the potential global economic impact of a growing trade war between the United States and China. Another wild card is the unknown political impact of the Saudi Arabian murder case of Washington Post journalist Jamal Khashoggi.
After the NYMEX started the morning slightly down and flat, RBOB and HO futures are now mixed as geopolitical news continues to be digested throughout the world. The top three issues impacting commodity prices continue to be the upcoming Iranian oil export sanctions in which there are conflicting reports as to the lost daily volume thus far, the recent murder of Washington Post journalist Jamal Khashoggi and the ongoing trade dispute between the U.S. and China.
As the U.S. sanctions on Iran are now a little over two months away with a start date of November 5th against Iranian oil exports, two other OPEC member nations, Saudi Arabia and Iraq, are continuing to position themselves to capture additional European oil market share as a result of these sanctions.