Oil Prices Drop Ahead of OPEC Production-Cut Figures – Hacked
Crude oil rose sharply on Monday, buoyed by a confluence of free-trade and production-related news following a high profile G20 summit over the weekend.
The Start of a Resurgence?
The West Texas Intermediate (WTI) benchmark for U.S. crude futures rose $2.11, or 4.1%, to $53.04 a barrel on the New York Mercantile Exchange. The January futures contract reached n intraday high of $53.85 a barrel. The London-traded Brent futures contract reached a high of $62.60 a barrel. It would later consolidate at $61.73 a barrel, having gained $2.27, or 3.8%.
Energy traders are growing more confident that the Organization of the Petroleum Exporting Countries (OPEC) will enact policies later this week that will drain excess supplies from the market. The cartel is scheduled to meet Thursday in Vienna to set new production quotas.
Oil was also aided by a drop in the U.S. dollar, which makes commodities more attractive for foreign buyers. The dollar index (DXY) fell 0.2% to 97.04.
Qatar Exits OPEC
The oil-rich Gulf nation of Qatar announced Monday it is pulling out of the 15-nation cartel to focus on natural gas production. Sad al-Kaabi, the country’s energy minister, said the decision will come into effect next month, which means Qatar will attend this week’s production meeting in Vienna.
“Qatar has decided to withdraw its membership from Opec effective January 2019 and this decision was communicated to OPEC this morning,” al-Kaabi said, according to The Guardian.
The energy minister reassured markets that the decision was not based on its political rift with Saudi Arabia, the de facto leader of OPEC. For the past 18 months, the Saudis have led a political and economic boycott of the tiny country, including a trade and travel embargo, over allegations that it supports terrorism.
Trade Tensions Thaw
U.S. President Donald Trump and Chinese counterpart Xi Jinping have agreed to de-escalate their trade war following a face-to-face meeting in Buenos Aires, Argentina this weekend. President Trump announced that China will “reduce and remove” the 40% duties on American-made cars. In exchange, the U.S. will not impose higher tariffs on Chinese imports at the beginning of 2019.
“My meeting in Argentina with President Xi of China was an extraordinary one,” Trump tweeted Monday. “Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!”
The truce will be in force for the next 90 days, allowing U.S. and Chinese officials to intensify bilateral trade talks. In the meantime, the U.S. will continue to tax $200 billion worth of Chinese imports at a rate of 10%. Trump had threatened to raise the duties to 25% if his meeting with Xi failed to achieve common ground.
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