Oil prices fell 4 per cent Thursday, but regained some ground after OPEC and its allies signalled later in the day that it would cut production. Baytex photo.
Oil prices down about 30 per cent this quarter
Oil prices recovered slightly from a 4 per cent fall during the session on Thursday after OPEC announced it agreed to a tentative deal to cut output. However, the cartel has not yet come up with a final amount for the reduction and Russia has not yet announced if it will commit to the new pact.
By 3:33 p.m., EST, benchmark Brent crude futures were down $1.33 to $60.23/barrel after hitting a session low of $58.36. US West Texas Intermediate futures bottomed out in the session at $50.08/barrel, but recovered to $51.66.
Both Brent and WTI have lost about 30 per cent this quarter.
OPEC is meeting in Vienna on Thursday and Friday to discuss a possible supply cut agreement beginning next month. While the cartel says it has reached a tentative agreement amongst its members, it is not ready to announce the terms of the deal.
Earlier on Thursday, Saudi Arabia’s Energy Minister Khalid al-Falih said the cartel needs Russia to opt into the deal, adding a decision by Friday evening is likely.
“If everybody is not willing to join and contribute equally, we will wait until they are,” said al-Falih.
Many analysts and market watchers expect the cuts will amount to somewhere between 1 million to 1.4 million barrels per day (b/d).
Oil prices found some support from data from the US Energy Information Administration which showed US crude stockpiles dropped last week for the first time in 11 weeks. The agency also reported the US became a net exporter of crude and refined products for the first time since 1991.
But, Abhishek Kumar, Senior Energy Analyst at Interfax Energy told Reuters that concerns over the escalating US – China trade war and “potential for OPEC+ not cutting oil production deep enough will continue to weigh on oil prices in today’s trading session”.
“All eyes are now fixated on tomorrow’s OPEC+ joint declaration, and a combined output cut of at least 1 million barrels per day will be required to see a meaningful recovery in oil prices.”
OPEC’s total crude production has climbed by 4.1 per cent to 33.31 million b/d.
After hopes that the trade war between the United States and China was moving towards resolution earlier in the week, the arrest of Meng Wanzhou, Huawei Technologies Co Ltd’s chief financial officer, has stoked concerns that the trade war will be reignited.
Meng’s arrest in Canada came when the Washington and Beijing were preparing for trade negotiations. Meng faces extradition to the United States and her arrest is related to US sanctions, according to Reuters.
Barclays was wary in its Global Outlook published on Thursday, saying “investors need to lower their expectations” and “2019 should be a period of lower returns and higher volatility”.
The financial services company added it expected “the global economy to slow over the next several quarters,” although it added that “not one major economy is near recession”.