Oil Prices Rally As Russia May Be Joining The Cuts

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WTI and Brent North Sea crude, another benchmark contract, have been tumbling for weeks on fears of a supply glut - despite oil kingpin Saudi Arabia planning an output cut and urging other producer nations to follow suit. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many USA politicians to impose stiff sanctions on Riyadh.

"It's a long shot, but the parties are going to be there and if there's something to be worked out, it can be worked out there", said Ed Morse, a veteran OPEC-watcher at Citigroup.

If the past is any guide, however, Saudi Arabia will do most of the cutting, Russia's output will end up little changed, and the main beneficiaries will be US shale firms.

"It is against this backdrop of the oil market looking rather oversold, that OPEC's decision needs to be viewed". Meanwhile, the specter of expanding US crude stockpiles has also been haunting the market.

According to the news report by Bloomberg, after a short respite, the downward slide of the price of crude oil started once again after news broke that there had been an unexpected large increase in American crude oil inventories. That would be the US benchmark's worst showing since October 2008. "It will be interesting to see if Saudi-Russia can keep the floor in place".

"Near-term oversupply has gutted Brent prices", US investment bank Jefferies said in a note on Friday, adding that there was "an increasing urgency to move crude into storage".

US oil reserves in 2017 exceeded a 47-year-old record when they increased 6.4 billion barrels, or 19.5 percent, to 39.2 billion barrels, the government said.

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In the current environment, the kingdom must do everything possible to prevent another price crash, which means it has little option but to cut its own production significantly. It needs crude above $73 on average next year to balance its budget, according to the International Monetary Fund. -China trade war in focus.

Saudi Arabia can not afford another slump in oil prices.

Privately, some OPEC delegates are discussing the idea of engineering a production cut without explicitly calling it that, perhaps by saying that output will fall because customers are asking for fewer bbl.

Since early November, oil prices dropped already at 23 percent.

The consortium controls almost 40 percent of the world's total oil supply.

Russia's latest budget had been built on the assumption of oil at $40, he said. In which case a significant cut of, say, 1 mb/d could lead to a rapid recovery in prices. That appeared to contradict another Russian official who on Thursday indicated a willingness to join Saudi Arabia in supply cuts.

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