Written on: December 3, 2018

Crude Oil and Refined Products Higher

Monday, December 3, 2018

Crude oil and refined products are higher in early trading on Monday, amid strong gains in global equities following a 90-day truce in US-China trade relations and overall encouraging economic data released over the weekend, weakness in the US dollar, and a Canadian plan to cut oil production, but despite news that Qatar is exiting OPEC, a Saudi Arabian plan to reduce its crude prices to Asian markets, and the re-opening of four Libyan oil export ports.

The world’s two largest economies, China and the US, agreed over the weekend at the G20 summit to halt additional tariffs on each other’s imported products, as the two nations continue their trade talks, aiming to reach an agreement within 90 days. President Trump told Chinese President Xi Jinping that he will hold off imposing tariffs on an additional $200bn worth of Chinese goods on January 1, as he had originally planned, and in response, President Xi Jinping promised to purchase a “very substantial” amount of products from the US, including energy products. An easing of trade tensions could support economic growth, thereby increasing demand for crude oil.

Canada’s New Democratic Party government said that it will force oil producers in Alberta to cut their production by about 325kb/d to remove some of the excess crude due to a pipeline bottleneck. The cut is expected to decrease to 95kb/d by December 2019. In other news, data from the Russian Energy Ministry showed that Russian oil production fell slightly to 11.37mb/d last month, from 11.41mb in October.

According to Reuters, Qatar said today that it plans to depart from OPEC in January to focus on its gas production, instead of oil production, as Minister of State for Energy Affairs Saad al-Kaabi said that “we are not saying we are going to get out of the oil business but it is controlled by an organization managed by a country”. He also said that as Qatar is a small player, it has no say in discussions regarding OPEC’s oil policy, and hence its decision to depart. Oil production in Qatar is currently staying at 0.6kb/d, but the country is the world’s largest exporter of liquefied natural gas.

Reuters sources reported that Saudi Arabia is expected to cut its crude prices to Asian markets in January, ahead of an OPEC meeting on December 6th in Vienna.

In economic news, Manufacturing PMI indexes for China and India climbed up last month, while the reading for Japan fell lower. Data for Europe were more upbeat, with manufacturing PMI indexes for the Eurozone and the UK topping the Econoday consensus. Market participants looked ahead to the November ISM Manufacturing Index for the US for further direction.