Energy agency: Global oil supply jumps, sending prices lower

Representatives from here major oil producers met in Abu Dhabi at the weekend

Saudi Arabia has issued a statement advising the need to cut production by a huge 1 million barrels per day.

Brent dropped US$1.97 a barrel, or 2.8 per cent, to a low of US$68.15 and was trading at around US$68.40 by 1045 GMT.

OPEC revised downward the forecast on oil production growth in 2018 by 40,000 barrels per day to 1.5 mln barrels per day and by 70,000 barrels to 1.29 mln barrels a day in 2019. "Whatever price that we end up with, the market will decide the price, not us".

What are countries doing to help raise oil prices?

The sharp drop in prices was seen after US President Donald Trump tweeted same Monday that Saudi Arabia and OPEC should not cut production to reduce supply.

The oil market had already been under pressure since the beginning of October amid trade tensions and concerns over rising interest rates.

Fear of lower demand is being driven by the strong U.S. Dollar which is making dollar-denominated crude oil very expensive for emerging market countries.

The slump in spot prices has turned the entire forward curve for crude oil upside down.

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"It is becoming clearer that as we move closer towards 2019, the market will see a sizeable surplus at least over the first half of 2019", ING said. OPEC and its partners, meanwhile, are said to be considering a bigger-than-anticipated cut in production.

Now, though, the rising supplies are threatening to turn into a glut, triggering a 25 percent sell-off in spot crude contracts LCOc1 CLc1 since early October as financial traders pulled money out of oil markets.

"This will, in our view, cap any upside above $85 per barrel (for oil prices)", said Jon Andersson, head of commodities at Vontobel Asset Management.

That surge in onshore output has helped overall USA crude production hit a record 11.6 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Crude in the USA dipped below US$55 a barrel this week for the first time in a year amid renewed fears of a glut, with domestic production at record-highs, rising OPEC output and waivers meant to ease the impact of sanctions against Iran.

American shale fields have pushed US oil production to all-time highs this year with crude output now at 11.6 million bpd, helping make the United States self-sufficient in energy.

Despite Saudi Arabia's pledge to cut production, the decline in prices has accelerated this week.

Global oil supply will outpace demand throughout 2019 as a relentless rise in output swamps growth in consumption that is at risk from a slowing economy, the International Energy Agency (IEA) said on Wednesday.

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