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Oil treads water amid expected OPEC cuts, gloomy economic outlook

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SINGAPORE (Reuters) – Oil prices were held in check on Tuesday as expectations of an OPEC-led supply cut supported the market but were countered by a deteriorating economic outlook, as well as a surge in U.S. production.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

U.S. West Texas Intermediate (WTI) crude futures, were at $57.14 per barrel at 0250 GMT, 6 cents below their last settlement.

Front-month Brent crude oil futures were at $66.75 a barrel, down 4 cents from their last close.

The Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of 1 million to 1.4 million barrels per day (bpd).

This comes amid widespread market expectations of an economic slowdown.

“We expect OPEC to agree to a supply cut at its next official meeting on 6 December,” French bank BNP Paribas said.

The bank therefore said it expected Brent to recover to $80 per barrel before the year-end.

“In 2019, we expect WTI to average $69 per barrel and Brent $76 per barrel,” BNP said.

The International Energy Agency (IEA), which represents the interest of oil consumers, on Monday warned OPEC and other producers of the “negative implications” of supply cuts, with many analysts fearing that a spike in crude prices could erode consumption.

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(GRAPHIC: U.S. oil drilling, production & storage – tmsnrt.rs/2PBfE7z)

SKEPTICAL INVESTORS

Crude prices remain almost a quarter below their recent peaks in early October, weighed down by surging supply and a slowdown in demand growth.

One reason has been that Washington has granted many of Iran’s biggest customers sanctions waivers that, for now, allow them to continue oil imports.

Using these waivers, Japan and South Korea are both looking to resume Iranian oil imports from January.

Meanwhile, supply in the United States is surging, with crude oil production up by almost a quarter this year, to a record 11.7 million bpd.

Financial traders have become wary of oil markets, seeing further price downside risks from the soaring U.S. shale production as well as a deteriorating economic outlook.

Portfolio managers have sold the equivalent of 553 million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.

Funds now hold a net long position of just 547 million barrels, less than half the recent peak of 1.1 billion at the end of September, and down from a record 1.484 billion in January.

Reporting by Henning Gloystein; Editing by Kenneth Maxwell

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