Oil dips after biggest gain in two months as OPEC talks in focus

Oil fell after rising the most in almost two months as major oil exporters prepare to discuss output policy amid rising price volatility.

Futures in New York lost as much as 1% after a 2.4% gain on Monday. All eyes are on this week’s G20 meeting in Argentina, which will include Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin, before OPEC meets next week in Vienna.

Meanwhile, US crude inventories are seen falling for the first time in 10 weeks in a Bloomberg survey before government data Wednesday.

Oil has collapsed into a bear market on fears of a supply glut amid a toxic mix of America’s unexpected sanctions waiver for Iranian oil, a record Saudi output and surging US production. Also, rising trade tensions between the US and China cloud the outlook for demand.

Speculation is swirling over whether the Organisation of Petroleum Exporting Countries and its allies will curb output when they meet on December 6, despite President Donald Trump’s call for lower prices.

"A tug-of-war between President Trump and oil producers will continue through the OPEC meeting," said Satoru Yoshida, a commodity analyst at Rakuten Securities in Tokyo. "Oil could remain volatile until the meeting, which will determine the direction of prices."

West Texas Intermediate for January fell as much as 52 cents to $51.11 a barrel on the New York Mercantile Exchange and traded at $51.25 at 4:20 pm in Tokyo. The contract rose $1.21 to $51.63 on Monday after plunging about 11% last week, the most since January 2016.

Total volume traded was 16% above the 100-day average. The Cboe/Nymex WTI Volatility Index fell on Monday from the highest level since early 2016 reached last Friday.

Brent for January settlement slid 21c to $60.27 a barrel on London’s ICE Futures Europe exchange. The contract added $1.68 to at $60.48 on Monday. The global benchmark traded at a $8.97 premium to WTI.

The oil market is abuzz with talk that Prince Mohammed may not be able to defy Trump’s desire for lower oil prices after the White House supported him following the killing of Jamal Khashoggi. Saudi Arabia’s output hit a record 11.2 million barrels a day, said a person familiar with the matter.

roller coaster

Goldman Sachs forecast the G-20 meeting would be a potential turning point, while Citigroup said, with Brent below $60 a barrel, it’s in the interest of both the Saudis and Russia to either freeze production or take oil out of the market.

Meanwhile, nationwide crude stockpiles in the US probably fell 1 million barrels last week after nine consecutive weeks of gains, the median estimate in the Bloomberg survey shows.

Inventories in the Cushing storage hub in Oklahoma probably added 600 000 barrels last week, according to a separate Bloomberg survey.

Other oil-market news:

A surge in oil output by OPEC, Russia and the US - along with higher-than-expected projections of Iranian flows - is seen leading to a decision for  a cut of 1 million barrels per day or more in OPEC+ production at an early December meeting, according to Societe Generale SA.

Ecuador will support OPEC’s production cut at the upcoming meeting, Energy Minister Carlos Perez said. 

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