That wrong-footed OPEC with Saudi Arabia and Russian Federation both pumping more than 11 million b/d at that time in a bid to offset the risk of lost Iranian barrels and left the market awash with crude.
The crude prices have declined by 40% after declaring the 4 year high, which was over $76 per barrel. The WSJ reports that Saudi Arabia plans on cutting exports 800,000 bpd below November levels, which appears to be a larger reduction than required as part of the OPEC+ agreement.
Citing an unnamed Opec official, the Wall Street Journal said Monday the kingdom needed oil prices at $95 a barrel to balance its capital expenditures, but it would be satisfied with prices at roughly $80-85/Bbl. If government data on Wednesday confirms that forecast, it would send a strong bullish signal to the market, said John Kilduff, a partner at Again Capital Management in NY. The Saudis are "just being aggressive about trying to clean up the situation they fell into from oversupplying the market based on the fear of Iran sanctions", he said.
While the global benchmark, Brent crude oil was up $1 at $58.06 per barrel, having touched a session high of $58.90, the United States crude was up 88 cents at $48.84 a barrel. Oil futures have gained more than 7 percent since last Monday. "Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said, according to Reuters.
A few other factors are contributing to the almost two-week rally.
Moving forward, the American Petroleum Institute will publish its weekly report on United States crude oil supplies ahead of tomorrow's official DoE report.
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The trade clash reflects American anxiety about China's rise as a potential competitor in telecommunications and other technology. US Commerce Secretary Wilbur Ross said Monday that China's economy is more vulnerable to the fallout from the trade war.
The first trading day of the week was also stimulated by declining US crude inventories. Disruptions to trade undermine prospects for economic growth and oil demand.
Oil prices continued to rebound on Monday, erasing part of the steep losses in December, as an OPEC-led output cut deal, going into effective this month, has begun to play its role.
Indeed, the oil market is already tightening up relative to the outlook in December when prices dropped to 18-month lows.
Many analysts had thought Saudi Arabia was coming under USA pressure to resist calls from other OPEC members for lower crude output.
Global equity markets are entering the New Year in the doldrums and are spooking traders and investors alike, closely mirroring the decline in manufacturing growth in both the US and China amid ongoing trade tensions. "Less sharply rising U.S. oil production may also play its part in this".