OPEC oil output records biggest drop since 2017

OPEC oil output records biggest drop since 2017”

"Not only are oil prices down almost 40 per cent since October (2018), they are in fact now below where they were when the group began their first iteration of output cuts back in January 2017, " the Japanese bank said.

Spot prices ranged between $45.61/bbls and $47.66/bbls, ending on the $47 handle.

"Russian crude production hit a post-Soviet high previous year averaging 11.16 million barrels per day".

The latest OPEC+agreement cutting output by 1.2mn in HI 2019 (Iran, Libya and Venezuela exempted) should at least put a "floor" under prices and lead to a "balanced" rather than "tight" market.

USA equity markets are being pressured by a steep drop in shares of Apple after the company lowered first quarter guidance.

Despite the turmoil, oil prices have received some support as supply cuts announced by the Organisation of the Petroleum Exporting Countries (OPEC) kick in. But in a market focused on total production numbers, it is US crude that is determining price direction.

"Well, J.P. Morgan said prior to the OPEC meeting early December, that if OPEC didn't really cut by more than around 1.2 million barrels per day, and they did just for the first half, (not) for the full year, that we could gravitate toward. our low-oil-price scenario, which is $55 Brent for 2019", JP Morgan's Scott Darling told CNBC on Wednesday. "Until we see more evidence that fundamentals in the market are not as weak as some think, I think we're going to keep feeling that pressure".

"Demand concerns started to take over", said Cailin Birch, a global economist at The Economist Intelligence Unit in London.

"The current bearish bias will therefore continue in the near term and it stands to reason that oil will struggle to break out from its current trough", he said. Oil prices ended 2018 lower for the first time since 2015, after a desultory fourth quarter that saw buyers flee the market over growing worries about too much supply and mixed signals related to renewed USA sanctions on Iran.

From an FX perspective the major currencies most sensitive to oil prices are the Indian Rupee, which is negatively correlated to oil since India has to import so much of the commodity; the Russian Rouble which is positively correlated since it is a major producer.

Oil prices reversed course and turned sharply higher in mid-morning trade yesterday.

Data for December from the Institute for Supply Management (ISM) on Thursday showed the broadest USA slowdown in growth for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty started to take a toll on the world's biggest economy.

Oil markets dropped by around 1 per cent in 2019's first trading on Wednesday, pulled down by surging United States output and concerns about an economic slowdown in 2019 as factory activity in China, the world's biggest oil importer, contracted.

However, much depends on relentless growth in non-OPEC supply (notably the US). The United Arab Emirates also cut its overseas sales.

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