Oil edges higher after Russian Federation indicates larger output cut

Oil edges higher after Russian Federation indicates larger output cut

World Oil production is just over 100 million barrels per day, so this is a 1.2% global cut.

The statement comes after the Islamic Republic reportedly asked other OPEC states to use the country's March or April oil production levels of about 3.8 million barrels per day as a baseline for the potential output cut as part of the extension of the OPEC-non-OPEC deal.

OPEC and its partners, which together account for about half of global output, say a glut in the market has led to oil prices falling by more than 30 percent in two months.

Against this backdrop, OPEC faced a particularly thorny challenge: Cutting too much and supporting prices at too high a level would risk curbing demand and supporting USA production expansion; and reverting to a market share war would risk another price collapse, with the attendant collateral damage to producing economies.

The US oil production appears ready to increase 2 million barrels per day in 2019 and another 2 million in 2020. In June, partly in response to the US renewal of sanctions on Iran and to offset declines in other producers, such as Venezuela, OPEC reversed course and began opening the spigots.

"U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market", said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher.

OPEC will first reconvene on Friday without outside partners, at 9 a.m.in Vienna, then at 12 p.m. the group meets with its non-OPEC allies, including Russian Federation, a delegate said.

After hitting highs of more than US$52 per barrel in October, the discount on Western Canadian Select bitumen-blend crude versus New York-traded West Texas Intermediate settled at about US$15 per barrel on Friday, according to Net Energy. First because apparently Russian Federation was expecting the Saudis to shoulder all the cuts alone in exchange for their support, and secondly Iran, whose crude exports have been depleted by US sanctions, objected to bear any cuts.

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While ministers met on Wednesday, Trump tweeted that the "world does not want to see, or need, higher oil prices!"

Yesterday, the price of Brent crude oil edged up as some of the major oil producers in the world agreed on a last-minute deal to decrease their output.

Opec is no more the sole arbiter of global crude dynamics. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many US politicians to impose stiff sanctions on Riyadh. The kingdom is under economic pressure after a collapse in oil prices last month, yet it's seeking to walk a fine line between preventing a surplus next year and appeasing President Donald Trump.

Exports of crude surged in the week to November 30 to more than 3.2 million barrels per day, the U.S. Energy Information Administration said on Thursday.

Before Thursday's meeting, Al-Falih said that "if everybody is not willing to join and contribute equally, we will wait until they are" and he was prepared for the consequences of no deal.

"Although we don't think that the current pricing differentials between Canadian barrels and USA barrels will be permanent, we are obligated to our shareholders to protect our business and our balance sheet until Canadian prices improve", said Cardinal in a news release.

In the end, the meetings showed the art of the possible, with a sizeable 1.2 million bpd cut - 0.8 percent from OPEC itself, and another 0.4 million from its allies.

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