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Oil rises on OPEC cut prospects, despite US record supply

Oil rises on OPEC cut prospects, despite US record supply

Mubasher: Oil prices edged up on Friday as the Organization of Petroleum Exporting Countries (OPEC) was expected to cut supplies, although record high US production weighed on markets.

By 5:46 am GMT, US Nymex crude futures rose 1.06% to $257.06 per barrel (pb), global benchmark Brent futures climbed 1.29% to $67.48 pb.

Expectations that OPEC would start withholding supplies soon, worried about a renewed slump as in 2014, mainly pushed prices higher.

OPEC’s de-facto leader Saudi Arabia wanted the producer group and its allies to curb output by around 1.4 million barrels per day (bpd), or about 1.5% of global supply, Thomson Reuters reported this week, citing sources.

However, cuts by the producer group may not deliver the desired effect, US bank Morgan Stanley warned.

“The main oil price benchmarks - Brent and WTI - are both light-sweet crudes and reflect this glut,” the bank said, adding that “OPEC production cuts are usually implemented by removing medium and heavier barrels from the market but that does not address the oversupply of light-sweet.”

Due to the market structural oversupply driven by record output from many producers, OPEC cuts are inherently temporary [because] all they can do is shift production from one period to another,” Morgan Stanley said.

In addition, US crude production hit another record last week, reaching 11.7 million bpd, the Energy Information Administration (EIA) said.

This resulted in a surge in US oil stockpiles by 10.3 million to 442.1 million barrels in the week ended 9 November, the highest level since December 2017.

This contributed to a rout in oil prices by around a quarter since early October.