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Oil falls towards $53 on economic worries, surging supply

US President Trump likens low prices to a tax cut

By Reuters - Jan 02,2019 - Last updated at Jan 02,2019

An employee takes a sample of oil at the Filanovskogo platform operated by Lukoil company in Caspian Sea, Russia, on October 16, 2018 (Reuters file photo)

LONDON — Oil fell towards $53 a barrel on Wednesday, under pressure from rising output in major producers of the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers and concerns about an economic slowdown that could weaken demand.

Russian production hit a post-Soviet record in 2018, figures showed on Wednesday. Other data showed US output reached a record in October and Iraq boosted oil exports in December.

Brent crude was 60 cents lower at $53.20 a barrel at 14:22 GMT. On December 26, it hit $49.93, the lowest since July 2017. US crude slipped 73 cents to $44.68.

"The omens are far from encouraging," said Stephen Brennock of oil broker PVM, citing rising non-OPEC supply and the likelihood of further increases in oil inventories.

"The current bearish bias will therefore continue in the near term and it stands to reason that oil will struggle to break out from its current trough," he said.

However, Nitesh Shah, director of research at WisdomTree, saw the prospect of a rebound for Brent because of an OPEC-led supply cut that starts this month and moderating US supply growth.

"We believe we will see an upward correction," he said. "Recent weakness in prices should slow the growth of US shale production."

Oil prices fell in 2018 for the first year since 2015 after buyers fled the market in the fourth quarter over growing worries about excess supply and the economic slowdown. 

Surging shale output has helped make the United States the world's biggest oil producer, ahead of Saudi Arabia and Russia. Oil production has been at or near record highs in all three countries.

US President Donald Trump celebrated the low prices. "Do you think it's just luck that gas prices are so low, and falling? Low gas prices are like another Tax Cut!" he wrote on his official Twitter account on Tuesday. 

Adding to concern about a slowing global economy, a series of purchasing managers' indexes for December mostly showed declines or slowing manufacturing activity across Asia, the main growth region for oil demand.

The signs of rising production illustrate the challenge facing the OPEC and its allies, including Russia, which are seeking to prop up the market with a supply cut of 1.2 million barrels per day.

However, the energy minister for the United Arab Emirates, an OPEC member, said on Tuesday he remained optimistic about achieving a market balance in the first quarter.

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