Oil steady as expected OPEC cuts balance high inventory

Oil steady as expected OPEC cuts balance high inventory

Implied volatility, a gauge of options demand, soared, with USA crude implied volatility hitting its highest level since February 2016 last week. This indicates at a possible trench being created by the oil marketing companies to form a buffer in case the oil prices increase again.

Towards the end of last week the crude oil market received another setback as its prices in the United States plummeted by almost 7 % and sank into a bear market that made vehicle owners a happy lot but set alarm bells ringing among investors.

John Hancock Financial Services' Adam Wise, a strategist who takes care of a $9 billion oil and gas portfolio, stated that everyone was now looking towards the OPEC meeting next week to get a sense of which direction oil prices were going to take.

So far, Russian Federation has been reluctant to commit to further supply cuts and will discuss the matter with its allies from the Organization of Petroleum Exporting Countries in Vienna next week. Wise stated that that would depend on the severity of cuts adopted by OPEC and its allies.

Saudi Arabia is not happy at all with Brent Crude at $60-it needs much higher prices, probably closer to $80, to balance its budget.

The West Texas Intermediate for January delivery fell 1.27 USA dollars to settle at 50.29 dollars a barrel on the New York Mercantile Exchange, while Brent crude for January delivery fell 1.72 dollars to close at 58.76 dollars a barrel on the London ICE Futures Exchange.

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Saudi Arabia will not act alone to steady oil markets, Energy Minister Khalid Al-Falih told reporters in Abuja yesterday ahead of what will be a key week for the global oil market.

It's not unusual for Russian Federation to leave everyone guessing until the very last moment whether it is on board with a production cut-Moscow has done so in all previous meetings since its oil-market-management cooperation with Riyadh started two years ago in November 2016.

Adding to the uncertainty in the oil markets were President Vladimir Putin's comments.

International Brent crude oil futures were up 89 cents, or 1.5 percent, at $61.10 per barrel. As a result, trade sources said three cargoes due to load in December had been cancelled.

Gasoline stocks fell by 764,000 barrels, compared with analysts' expectations for a 640,000-barrel gain.

In other words, USA crude inventories hit their highest level in a year after a tenth consecutive weekly increase, and are now only 80 million barrels below March 2017's record 535 million barrels, according to the Energy Information Administration.

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