Oil Mixed in Tuesday Trade

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the Brent crude contract on the Intercontinental Exchange were shallowly mixed early Tuesday, still gripped by a bearish view of global fundamentals ahead of key meetings between the presidents of the United States and China and between the oil ministers for Russia and Saudi Arabia at the Friday-Saturday G-20 meeting in Argentina.

While U.S. President Donald Trump said an agreement over trade between the United States and China could be reached this week, he also said he would not delay slapping additional tariffs on Chinese imports in January should a deal not be reached.

The U.S.-China trade dispute has been a key factor in downward revisions of global economic growth for this year and in 2019, with a slowdown already observed in China. On Monday, the World Trade Organization released their World Trade Outlook Indicator that fell to a two-year low of 98.6, with a reading under 100 signaling below-trend growth in world trade.

Russia has signaled it is against reducing oil production as proposed by Saudi Arabia, with Russian Oil Minister Alexander Novak earlier this month saying the world oil market had achieved balance. Novak is set to meet Saudi Arabian oil minister Khalid al-Falih this weekend ahead of the Dec. 6 meeting of the Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers led by Russia.

"The talk is that Saudi Arabia is already reducing oil exports and engineering a 1.5-million-barrel oil a day production cut, along with Russia and other OPEC nation conspirators," said Phil Flynn, senior market analyst with the PRICE Futures Group.

The Saudis have already announced they would reduce production by 500,000 barrels per day (bpd) in December, while output reached an all-time high near 11.0 million bpd earlier this month. Flynn said Saudi oil storage is at a 10-year low.

Concern over a global oil glut emerging in 2019 followed news that the United States provided eight countries waivers from U.S. sanctions on Iranian oil exports for 180 days from a Nov. 5 effective date, with many in the market expecting the Trump administration to drive exports towards zero. The analysis now is the waivers allow about 900,000 bpd of Iranian oil to reach global oil markets through early second quarter 2019.

Noncommercial traders continued to liquidate long positions in Nymex oil futures during the week ended Nov. 20, the Commodity Futures Trading Commission reported late Monday afternoon, with speculators cutting a net-long position in Nymex WTI futures to a 15-month low with open interest falling to a one-year low.

The heavy sell-off in the fourth quarter has been overdone, according to several analysts. Goldman Sachs on Monday provided market guidance, saying investors should buy at current price points because the downside is limited.

In early trading, Nymex January WTI futures were up about $0.20 near $51.85 per barrel (bbl), with ICE January Brent futures gained $0.25 to near $60.75 bbl. Nymex December ULSD futures reversed off a fresh eight-month spot low of $1.8674 gallon to trade up 0.55 cents to $1.8985 gallon. Nymex December RBOB futures were down about 0.35 cents to $1.4390 gallon.

Brian L. Milne can be reached at brian.milne@dtn.com

(CZ)

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