Oil Prices Climb on Potential OPEC Plans

Oil prices edged higher on Monday amid expectations that Saudi Arabia will talk the Organization of the Petroleum Exporting Countries (OPEC) into curbing supply towards the end of 2018.

International benchmark Brent crude oil futures for January delivery gained 0.6 percent to $67.15 per barrel, while US Texas Intermediate (WTI) crude futures added 1.2 percent to $57.36 a barrel.

Sukrit Vijayakar, director of an Indian energy consultancy firm, said oil prices continued to recover as the market anticipates the possible impact of a supply cut.

Top producer Saudi Arabia is calling for the OPEC and allies to slash 1 million to 1.4 million barrels per day (bpd) of their supply to cope with the slowdown in demand growth and avoid a supply glut.

Russian Energy Minister Alexander Novak stated on Monday that Russia, a non-OPEC member, intends to form a partnership with the producer group, and that details would be discussed at OPEC’s meeting in Vienna on December 6.

Still, as stockpiles mount and demand slows, crude prices remain about a quarter below their recent highs booked in October.

Pressure in prices came after US President Donald Trump’s administration granted Iran’s major oil customers, mainly in Asia, waivers to sanctions it reemployed on Tehran in November.

Japanese refiner Fuji Oil Co. Ltd. will continue buying Iranian crude after Japan has been given one of those exemptions, according to industry sources with knowledge of the matter. The country held off purchases of Iranian oil before being granted a waiver earlier this month.

Markets, however, remained cautious amid deep US-China trade row, after the world’s two largest economies failed to resolve their dispute at the Asia-Pacific Economic Cooperation (APEC) in the weekend.

Chief Market Strategist Hussein Sayed said US statements from APEC suggest that a deal between President Trump and President Xi is unlikely to see the light when the leaders meet at G20 Summit later this month.

Meanwhile, data released by a Texas-based energy services firm on Friday showed US energy firms has added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015.

The increase in drilling activity signals higher US crude oil production, which has already risen by nearly a quarter in 2018, to a record of 11.7 million bpd.

The rise in supply and the slowdown in demand have also left financial markets wary of the oil sector. The US Commodity Futures Trading Commission (CFTC) stated on Friday that money managers has brought their bullish bets on futures and options down to the lowest level since June 2017.

The speculator group reduced its combined futures and options positions on the US and Brent during the week ended November 13 to the lowest since June 27 last year.

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