Oil suffers losses as the Saudis pressure OPEC+ to reduce production quotas

(Bloomberg) — Oil stabilized after a string of losses as the market weighs the possibility of deeper production cuts from OPEC+ against signs that global supply is outstripping demand.

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Brent crude oil traded below $80 a barrel, after a four-day losing streak that wiped out futures by 3%. The price of WTI was below $75. Saudi Arabia, the de facto leader of OPEC+, has asked other members to reduce production quotas to support markets, despite opposition from some members, delegates said.

“Oil speculators should be careful not to underestimate Saudi Arabia’s determination,” said Vishnu Varathan, head of Asian economics and strategy at Mizuho Bank Ltd. “But it will be difficult for them to get approval from all member states.”

The price of crude oil has fallen by about a fifth since late September due to abundant supplies and concerns about the global economic backdrop, putting pressure on the 23-nation coalition to intervene at its online meeting on Thursday. The International Energy Agency warned earlier this month that markets would return to surplus next year amid a significant slowdown in demand growth.

A Bloomberg poll of traders and analysts late last week showed that about half of respondents expect OPEC+ to take further measures to tighten the market. If the coalition does not announce an additional cut of about 1 million barrels per day on top of the restrictions imposed by Saudi Arabia, prices could fall to the $70 per barrel level, according to analysts at the Eurasia Group led by Raad Al-Qadiri.

Reflecting the weakness, hedge funds have turned increasingly bearish on crude oil. The latest weekly data from ICE Futures Europe and the CFTC through November 21 showed that money managers cut their combined net long positions in Brent and WTI to the lowest level since late June. Oil options skews also showed a bearish bias, while widely observed time periods also declined.

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Elsewhere, a storm in the Black Sea halted loadings of goods including crude oil from major ports in Russia and Ukraine. The storm is expected to last most of this week, according to Russian oil pipeline operator Transneft PJSC.

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