According to the news report by Bloomberg, the price of oil went up for the first time in the last three days after Russia indicated that it would be willing to join with Saudi Arabia in cutting down on global oil supplies.
In an interview in Buenos Aires, Argentina, Russian Foreign Minister Sergei Ryabkov stated that his country wanted more predictability and price stability in the global crude oil markets.
These remarks foreshadowed the G20 Summit where the Russian President Vladimir Putin and Crown Prince Mohammed Bin Salman of Saudi Arabia are expected to meet to discuss the issue of oil production and supplies in the global market. This meeting will take place ahead of the scheduled OPEC+ meeting in Vienna next week.
The American benchmark for crude oil, the West Texas Intermediate has dropped by more than 21% this month alone, making it on track for its worst monthly performance in the last 10 years.
However, according to the dead commodity strategist for TD Securities, Bart Melek, after the price of crude oil fell below the $50 mark, which is a critical budgetary market for the American shale oil drillers, some traders feel that the market is oversold. He said that a below-$50 price would stress the finances of shale producers. This would mean that the production increase could automatically slow down.
After the news broke that Russia would be willing to discuss oil production cuts, the price of oil went up. The West Texas Intermediate futures contract for January saw a $1.16 increase to close the trading day at $51.45 per barrel on the New York Mercantile Exchange.
The international crude oil benchmark, Brent saw its futures for January (which expires on Friday) increase by $0.75 to close the trading day at $59.51 per barrel. This is $8.06 premium on the American benchmark. Brent’s February contract, which was the more active of the two, went up by $0.82 to close the trading day at $59.51 per barrel also.
President Putin had on Wednesday praised Crown Prince Mohammed Bin Salman, stating that Moscow was willing to cooperate further with Saudi Arabia. Putin also stated that a price level of $60 per barrel was balanced as well as fair and that it was more than enough to keep the Russian government’s budget at a surplus.
In stark contrast to that, Saudi Arabia needs global oil prices to be at $80 or above for the kingdom to balance its budget.
Ryabkov stated that no one was interested in either an oversupply or an artificial deficit of oil.
In other news from the oil market, Gasoline futures shot up by 4.1% to trade at $1.4547 per gallon.
The 14-day Relative Strength Index for West Texas Intermediate shows that the American benchmark has been in oversold condition the entire month of November. And the complete Brent futures curve has fallen into a bear contango structure, showing that there is an excess supply of oil in the global crude market.
And finally, shipping and trade data is showing that China is buying every oil cargo it can lay its hands on. Data from Chinese customs shows that last month, the inflows of oil were the highest for this time of the year since the data was first reported in 2004.
The Asian giant is also buying oil from West Africa. The country has already bought 1.78 million barrels per day for this month alone, levels that have not been seen since September 2011. The purchases made from that region are in fact more than 70% higher than the amount purchased at the same time last year.