On Monday oil prices slipped below $50 on concerns that the output cuts by OPEC will work, with the rising output oversupply of oil by U.S. put investor sentiment under pressure.
Brent crude fell 1 percent at $59.77 per barrel, down 51 cents.
U.S. light crude slipped to $50.32 or 1.7 percent down 88 cents.
On the New York Mercantile Exchange, delivery contract for January West Texas Intermediate closed at $49.88, falling 2.6 percent in Seoul.
On London’s ICE Futures Europe exchange Brent for February settlement lost 1.4 percent to $58.77 a barrel, losing 84 cents.
Cushing Inventories Rise
U.S. crude futures fell after data from Genscape, market intelligence firm reported inventories at the biggest storage hub in Cushing, Oklahoma in the U.S. are growing. Between Dec. 11 and Dec. 14 inventories rose over 1 million barrels. The Energy Information Administration said that the output at major U.S. shale is at 8.166 million barrels per day for January and upped their forecast for December to 8.03 million barrels per day. According to some analysts, stockpiles nationwide decreased in the week ending Dec.14 by 1.3 million barrels. While inventories at Cushing rose 1.3 million barrels last week.
The analyst at Price Futures Group in Chicago, Phil Flynn said that the numbers were higher than they forecast, adding to concerns that the supply and demand are weakening, which is fueling the market’s nervousness.
OPEC and Allies Pledge to Cut Production
Skepticism by investors that the pledged reduction in oil output by OPEC and its allies, including Saudi Arabia and Russia will be implemented, and will be sufficient to rebalance the markets. They have agreed to cut output by 1.2 million bpd from January and will review this in April. According to sources, Russia oil output is at 11.42 bpd in December, a record high.
According to news reports Suhail al-Mazrouei, UAE Energy Minister said that he expected everyone to cut oil supply following their meeting in Vienna earlier in the month.
Veteran crude trader Andy Hall said that the growth in U.S. shale is making it hard to predict supplies globally there are also fears that it will be detrimental to the efforts of oil producers who have pledged to cut production to balance the oversupply.
That’s not all …
The dampening mood in oil and other assets is growing concerns about the weakening in major markets growth like China and Europe.
China and European Growth Falls
In November Chinese oil refinery throughput fell from October which reflects an easing in oil demand, while there was a contraction in December in French business activity which fell unexpectedly. Private sector expansion in Germany slowed in December to a four-year low.
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