Oil rebounds from steep selloff as OPEC, partners discuss supply cut
* Jump in supply comes as demand outlook weakens
* OPEC+ discuss supply cut of up to 1.4 million bpd -sources
* Brent flips into contango: https://tmsnrt.rs/2PV7pCH
(Adds analyst comments, details about selloff, updates prices,
By Devika Krishna Kumar
NEW YORK, Nov 14 (Reuters) - Oil rose about 2 percent on
Wednesday, recouping some of the previous session's heavy
selloff, on the growing prospect of OPEC and allied producers
cutting output at a meeting next month to prop up the market.
Prices recovered, with Brent inching back above $67 after
Reuters reported that OPEC and its partners are discussing a
proposal to cut output by up to 1.4 million barrels per day
(bpd), a larger figure than officials had mentioned previously.
Brent crude futures rose $1.36 to $66.83 a barrel, a
2.1 percent gain by 11:35 a.m. EST (1635 GMT). WTI crude
futures for December delivery rose $1.14 to $56.83 a barrel, a
2.1 percent gain.
The price of Brent has fallen by more than 20 percent since
early October on concern about excess supply and slowing demand,
one of the biggest declines since a price collapse in 2014. U.S.
crude had declined for a record 12 consecutive sessions to the
lowest since November 2017.
"The market has cratered over the last few weeks and the pop
today is related to the chatter that producers could cut up to
1.4 million bpd in 2019," said Gene McGillian, vice president of
market research for Tradition Energy in Stamford, Connecticut.
"Maybe some of the fears of extra supplies and reduced
demand have finally been priced into the market, but I wouldn't
say that a bottom has set in yet."
The selling leading up to Wednesday was further exacerbated
as traders unwound long oil - short natural gas trade, market
participants said. As oil crashed from the high touched in
October, natural gas futures soared as much as 56 percent
during that time to a 4-1/2 year high.
Moreover, financial firms hedging the risk incurred by
selling put options to oil producers, generating added downward
pressure when prices fall toward option strikes, Goldman Sachs
said in a note.
Oil markets are being pressured from two sides: a surge in
supply from OPEC, Russia, the Unites States and other producers;
and increasing concerns about a global economic slowdown.
"This market is attempting to find a price bottom following
an unprecedented 12 consecutive days of decline," Jim
Ritterbusch, president of Ritterbusch and Associates, said in a
"Although the supply surplus is still relatively modest, the
market is focusing on the dynamic of expansion in the overhang
that will need to show signs of reversal before a price bottom
can be established."
In its monthly report, the Paris-based International Energy
Agency (IEA) said the implied stock build for the first half of
2019 is 2 million bpd.
The IEA left its forecast for global demand growth for 2018
and 2019 unchanged from last month at 1.3 million barrels per
day (bpd) and 1.4 million bpd, respectively, but cut its
forecast for non-OECD demand growth, the engine of expansion in
world oil consumption.
U.S. crude oil output from its seven major shale basins is
expected to hit a record 7.94 million barrels per day (bpd) in
December, the U.S. Department of Energy's Energy Information
Administration (EIA) said on Tuesday.
That surge in onshore output has helped overall U.S. crude
production <C-OUT-T-EIA> hit a record 11.6 million bpd, making
the United States the world's biggest oil producer ahead of
Russia and Saudi Arabia.
Most analysts expect U.S. output to climb above 12 million
bpd in the first half of 2019.
The rise in U.S. production is contributing to higher
stockpiles. Official storage data is due on Thursday from the
EIA, with analysts expecting a 3 million barrel rise in crude
(Additional reporting by Alex Lawler, Ahmad Ghaddar, Amanda
Cooper and Henning Gloystein; Editing by Jason Neely, Alexandra
Hudson, Kirsten Donovan and Will Dunham)
First Published: 2018-11-14 02:44:35
Updated 2018-11-14 18:57:11
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