U.S. investment banks see low oil prices despite OPEC cut

U.S. investment banks see low oil prices despite OPEC cut

U.S. investment banks see low oil prices despite OPEC cut

"Friday's agreement was a seemingly good one, or maybe we should say the best one under the current circumstances", Tamas Varga, a strategist with PVM Oil Associates, said.

The cartel and its partners agreed to cut production from October levels, by 2.5 percent for every OPEC member besides Libya, Iran, and Venezuela. The minister said the cuts will help restore balance to the world market in 2019.

Prices rose 3 percent on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russian Federation said they would cut oil supply by 1.2 million barrels per day (bpd).

However, while we saw an initial boost to crude prices, it has clearly not done enough to spark calls for a bottom quite yet.

That sentiment was echoed by commodity hedge fund Philipp Oil, which said in an investor letter that while Brent has found a floor of around $60 a barrel after the supply limits were announced, weaker oil demand and booming US shale output will keep markets oversupplied.

Citigroup said Monday in a note that output cuts from the cartel and its allies, dubbed as OPEC+, would encourage USA shale producers to pump more crude to the global oil market.

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Trump insists he will stick by Riyadh despite the outrage but he has been also ramping up the pressure for more oil. Meanwhile, China's vice premier discussed a timetable and road map on trade talks with his USA counterpart.

Some countries have been applied a compromise within the framework of the agreement on reduction of oil production. The slower economic growth is expected to influence the demand for oil next year and along with the growing production in the United States, the prices are estimated to decline eventually.

Although Qatar is OPEC's smallest Middle East oil producer, it's now the world's biggest liquefied natural gas (LNG) exporter. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Output this year was forecast to rise 1.53 million barrels per day (bpd) to 10.88 million bpd, and while this was down from the EIA's previous estimate of a 1.55 million bpd increase, it still beats production in every other country.

The new agreement comes at a time when crude prices have dropped more than 30% from their highs in early October, negatively impacted by concerns about oversupply, weakness in global markets and technical trading that exacerbated the slide.

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