Oil downside risk at four-year high on OPEC inaction fears

11:15am

Faced with high oil prices and the prospect of its negative impact on the mid-term elections, US President Donald Trump leaned on Saudi Arabia to use its influence as the defacto leader of OPEC and its budding ties with Moscow to persuade the grouping's members and Russian Federation to ramp up production.

Oil prices tumbled about 7 percent on Tuesday, with US crude plunging to its lowest level in more than a year, caught in a broader Wall Street selloff that was fed by rising concerns about slowing global economic growth. "The market expects OPEC to set the direction and play the role of swing producer again even as American production rises".

Iranian crude oil importers in South Korea and Japan are said to be planning the resumption purchases from the sanctioned Persian producer beginning in January, after the USA granted the countries temporary waivers from sanctions.

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The crisis was set into motion with Lieberman's resignation over the ceasefire, which he labelled "capitulating to terror". He then said to the heads of the parties making up his coalition: "At such a time, you don't overthrow a government".

Traders said futures pared losses on bullish stockpile data Monday as they said that energy information provider Genscape reported that crude inventories fell in the week ended Friday.

The rising drilling activity points to a further increase in USA crude oil production, which has already jumped by nearly a quarter this year, to a record 11.7 million bpd.

Helping to keep a lid on prices are signs of lower demand due to the lingering trade disputes between the world's two biggest economies, the United States and China. On Monday, Japan's Ministry of Finance reported that October crude oil imports fell by 7.7 percent from the same month a year ago, to 2.77 million barrels per day (bpd).

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In turn, the price of oil WTI for January delivery in electronic trading on the NY Mercantile exchange (NYMEX) fell $0.29 to (0,51%) - to $from 56.91 per barrel. The December contract settled up 0.5 percent on Monday and has expired. Total volume traded was 3% below the 100-day average.

In other news, USA energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, according to energy services firm Baker Hughes.

"Fundamentals over the next six months point to a recovery in oil prices following their sharp decline in October and early November", BNP Paribas said.

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The current production cut agreement, in force from January 2017, has removed a combined 1.8 million barrels of crude per day from the market to help the market re-balancing. Options show a scramble for protection in the United States Oil Fund LP, ticker USO, which aims to track the price of West Texas Intermediate crude futures. USA crude production has been rising, hitting a record in the week ended November 9, according to government data. The details would be discussed at the meeting of the organization scheduled for December 6 in Vienna.

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