Oil Rally Slows amid Reports of OPEC Infighting
Crude oil is under pressure Thursday as reports of OPEC infighting cast doubts about the cartel’s ability to rein in production in 2019. Saudi Arabia, the group’s de facto leader, is also under attack following an IEA reporting showing record output from the kingdom in November.
The rally in crude prices appears to be choppy and short-lived since last week’s high-profile production meeting in Vienna, Austria. On Thursday, U.S. West Texas Intermediate (WTI) futures were down 34 cents or 0.7%, to trade at $50.81 a barrel on the New York Mercantile Exchange. The January futures contract reached a session low of $50.35 a barrel.
Brent crude, the international futures benchmark, bottomed at $59.33 a barrel on London’s ICE futures exchange. At the time of writing, it was down 35 cents, or 0.6%, to $59.80 a barrel.
The International Energy Agency (IEA) reported Thursday that crude production among OPEC members reached record highs in November, casting doubts about the planned output cuts by Saudi Arabia and its allies. The 15-member cartel churned out 33.03 million barrels per day in November, a net gain of 100,000 barrels per day over the previous month.
Gains were driven entirely by two members: Saudi Arabia and the United Arab Emirates. Saudi’s daily production jumped 410,000 barrels to 11.06 million barrels, a new record high. The UAE saw its output climb by 110,000 barrels per day to reach 3.33 million barrels per day. In doing so, the UAE surpassed Iran as the group’s third-largest producer.
IEA data contrasts sharply with the official OPEC report, which showed a slight decrease for the month of November. More importantly, it raised suspicion that the Saudis are not intent on lowering production by any significant amount in the new year but are simply paring back from record levels.
The Saudis are facing pressure from within the producer group and from the United States on issues ranging from production policy, the war on Yemen and the killing of Jamal Khashoggi. Bloomberg reports that Iran’s oil minister Bijan Zanganeh has vocalized serious political disagreements within the cartel that came to light during last week’s production meeting in Vienna. What’s more, Qatar is planning to quit the producer group in the new year to focus on natural gas production. This may exacerbate the geopolitical rift between Doha and a Saudi-led coalition of Arab states that have blockaded the tiny Gulf country.
In a rare show of bipartisan support, the U.S. Senate last month voted to end support for Saudi Arabia’s devastating war on Yemen. The vote came as the CIA offered irrefutable evidence that Saudi Crown Prince Mohammed bin Salman (MbS) was party to the killing and dismemberment of U.S.-based journalist Jamal Khashoggi.
You have to be willfully blind not to come to the conclusion that this was orchestrated and organized by people under the command of MbS,” Republican Senator Lindsey Graham said earlier this month.
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