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Top Global Oil Producers to Mull Fresh Cuts as US-China Trade War Hits Prices

Gasoil News - Published on Tue, 10 Sep 2019

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AFP reported that top oil producers will consider fresh output cuts at a meeting this week, but analysts are doubtful they will succeed in bolstering crude prices dented by the US-China trade war. The OPEC petroleum exporters' cartel and key non-OPEC members want to halt a slide in prices that has continued despite previous production cuts and US sanctions that have squeezed supply from Iran and Venezuela. The OPEC+ group's Joint Ministerial Monitoring Committee, which monitors a supply cut deal reached last year, has limited options when it meets in Abu Dhabi on Thursday. The obvious move is to deepen the reductions. But while that could help prices, it also risks further losses of market share

Mr MR Raghu, head of research at Kuwait Financial Centre, said that "OPEC has traditionally resorted to production cuts in order to shore up the prices. However, this has come at the cost of reduction in OPEC's global crude market share from a peak of 35 percent in 2012 to 30 percent as of July 2019."

The 24-nation OPEC+ group, dominated by the cartel's kingpin Saudi Arabia and non-OPEC production giant Russia, agreed to reduce output in December 2018. That came as a faltering global economy and a boom in US shale oil threatened to create a global glut in supply. Previous supply cuts have mostly succeeded in bolstering prices. But this time, the market has continued to slide -- even after OPEC+ agreed in June to extend by nine months an earlier deal slashing output by 1.2 million barrels per day.

- Trade war - The new factor is the trade dispute between the world's two biggest economies, whose tit-for-tat tariffs have created fears of a global recession that will undermine demand for oil.

Saudi economist Fadhl al-Bouenain said the oil market has become highly sensitive to the US-China trade war. What is happening to oil prices is outside the control of OPEC and certainly stronger than its capability. Accordingly, I think OPEC+ will not resort to new production cuts" because that would further blunt the group's already shrunken market share.

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Posted By : Rabi Wangkhem on Tue, 10 Sep 2019
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