Oil slipped on concern that the chronic US-China trade dispute will weaken demand, while traders awaited concrete signs that OPEC and its partners will reduce supply.
Futures fell as much as 2.1 percent in New York, even after an agreement between Saudi Arabia, Russia and other producers to cut output sent prices higher last week. Those gains are vulnerable because it remains uncertain exactly how the so-called OPEC+ alliance will implement the pledged cutbacks, according to Goldman Sachs Group Inc. and Morgan Stanley. Asian and European stock markets faltered on weaker economic indicators from China.
“One explanation for the weakness is that the macro world is in risk-off mode again,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “The other is that the OPEC cuts don’t start until January, and the market probably wants to see exports leveling off before prices go higher.”
The Organization of Petroleum Exporting Countries and its partners on Friday defied US president Donald Trump’s call to keep the taps open, agreeing to remove more than 1 percent of global production to revive prices. Crude has slid from a four-year high in early October after Washington gave temporary exemptions from sanctions to eight nations purchasing Iranian oil, while America exacerbated a global glut by pumping at record levels.
West Texas Intermediate futures for January delivery declined as much as $1.10, and were down 99 cents at $51.62 a barrel on the New York Mercantile Exchange as of 1:58 p.m. London time. Prices rose $1.12 to $52.61 on Friday. Total volume traded Monday was 27 percent above the 100-day average.
Brent for February settlement fell 80 cents to $60.87 a barrel on London’s ICE Futures Europe exchange, after rising $1.61 on Friday. The global benchmark crude traded at a premium of $9.02 to WTI for the same month.
The OPEC+ deal is testament to the strength of Saudi Arabia’s two-year-long cooperation with Russia and showed Crown Prince Mohammed bin Salman is willing to defy the wishes of Trump even after the murder of Jamal Khashoggi.
Still, uncertainty remains in the market, given the deal doesn’t specify country allocations and excludes Libya, Venezuela and Iran from the curbs, according to Goldman Sachs. While Morgan Stanley said the cuts will probably be sufficient to balance the market in the first half of next year, it sees limited upside to prices and cut its Brent price forecast by $10 a barrel for 2019.
First Published: Dec 10, 2018 20:01 IST
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