CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Brent crude on the Intercontinental Exchange moved higher in early trade, reversing off new multi-month lows traded overnight on indications Russia will cooperate with Saudi Arabia on reducing oil production in 2019.
Reuters reported Russian President Vladimir Putin will meet with Saudi Crown Prince Mohammed bin Salman at the Friday-Saturday Group of 20 meeting in Argentina, when they will discuss oil production cuts ahead of the Dec. 6 meeting between Organization of the Petroleum Exporting Countries and 10 non-OPEC oil producers led by Russia. Despite next week's OPEC meeting, a decision on OPEC production is expected to be decided this weekend.
Russian Oil Minister Alexander Novak earlier this month said the global oil market was in balance, and that it was too early to discuss cutting production. Russia's hesitation and criticism by U.S. President Donald Trump prompted Saudi Arabia to back off a proposal for an OPEC+ production cut of 1.4 million barrels per day (bpd) in 2019.
On Wednesday, Saudi Oil Minister Khalid al-Falih discussed the need for reducing oil production but suggested the kingdom wouldn't do it alone, seeking a united front by OPEC, according to Reuters. That includes bringing Nigeria into the fold, with the OPEC member exempted from production cuts during the 2016 Vienna agreement that's set to expire year end. Nigeria's oil minister agreed production cuts are needed, but did not commit.
Saudi's al-Falih previously indicated the global oil market would be oversupplied by 1.0 million bpd in 2019 without a production cut.
News of these developments reversed an overnight price slide, with Nymex West Texas Intermediate slipping below $50 barrel (bbl) on the spot continuation chart for the first time since October 2017.
Oil futures were also under pressure from bearish data from the Energy Information Administration released Wednesday showing a tenth consecutive weekly build in U.S. commercial crude stocks for the week ended Nov. 27 to a one-year high at 450.5 million bbl. Domestic crude production is at a record 11.7 million bpd high.
The weekend G-20 meeting will also include a meeting between Trump and Chinese President Xi Jinping, when the two leaders are expected to discuss their trade dispute. Trump has said he would move ahead with additional tariffs on Chinese imports in January if a deal is not reached.
Nymex January WTI futures reversed off a $49.41 bbl low to trade up $0.85 near $51.15, with ICE January Brent climbing off a $57.50 13-month low on the spot continuous chart to trade up $0.65 in morning trade near $59.40 bbl. February Brent is trading at a $0.30 premium to the January contract, which expires at Friday's close.
After reversing off a 9-1/2 month spot low at $1.8183 to trade as high as $1.8562, Nymex December ULSD futures were again down 0.55 cents near $1.8330 gallon ahead of Friday's expiration, with the January contract at a 10-cent discount to December.
Nymex December RBOB futures slumped to a $57.50 two-year low on the spot continuation chart overnight before reversing higher, up 1.75 cents near $1.4155 gallon. January delivery is trading at a 1.95 cents discount to the expiring December contract.
Brian L. Milne can be reached at email@example.com
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