Published: Thu, December 27, 2018
Finance | By Jaime Brady

Crude spirals to 17-month low amid global economic concerns

Crude spirals to 17-month low amid global economic concerns

Brent crude recovered after dipping below $50/bbl for the first time since July 2017 on the strength of a rebound by USA stocks and a hint that OPEC and its partners could meet again to discuss output curbs.

The decline in prices prompted USA shale producers to cut back on their drilling plans for next year. EOG Resources (EOG), a big US shale producer, was flat.

At a press briefing in Kuwait, Iraqi, the U.A.E. and Algerian energy ministers took turns repeating the message that OPEC will deliver its 800,000 barrels per day cut and continue their cooperation with other producers to balance supply and demand.

The letter also states that countries will reduce production by 3.02% to meet the 1.2 million-barrel-per-day cut, up from the 2.5% agreed on during the meeting.

After a turbulent eight weeks, during which crude oil lost almost 30 percent of its value, a last minute deal between countries of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries to cut production is expected to lend some stability to the market.

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Broader financial markets have been under pressure on worries about a global economic slowdown amid higher US interest rates and the U.S. That follows the United Arab Emirates energy minister's remarks, signaling the producers could hold an extraordinary OPEC meeting and discuss additional curbs if needed.

"The main input over the weekend has been the continued intervention by OPEC members", said Olivier Jakob, managing director at Petromatrix.

The and allies led by Russian Federation agreed this month to cut oil production by 1.2 million barrels per day from January. Bloomberg quoted a Rakuten Securities analyst as saying, "There are several bearish factors in oil markets, and the situation won't improve anytime soon".

February West Texas Intermediate CLG9, +0.58% gained $4.69, or 8.6%, to $46.22 a barrel on the New York Mercantile Exchange. Total volume traded Monday was about 42 percent below the 100-day average ahead of the Christmas holiday Tuesday. They had slumped 6.7 percent in the previous session to $42.53 a barrel - the lowest since June 2017.

Brent for February settlement added $1.12/bbl to $51.59/bbl on the London-based ICE Futures Europe exchange after earlier dropping to as low as $49.93. While there are many sectors such as tyre, chemicals, paints, airline etc. which use crude oil as their major raw material would be benefiting from oil prices.

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