Oil Slips as Pessimism Over Supply Resurfaces Despite OPEC Pledge

Oil pump jacks are seen next to a strawberry field in Oxnard California

While Saudi Arabia's Energy Minister Khalid al-Falih says that based on the OPEC+ group technical analysis, "there will need to be a reduction of supply from October levels approaching a million barrels", reports emerged last week that Russian Federation would rather stay out of any fresh oil production cuts led by the Saudis.

Crude futures rose ahead of settlement in choppy trade on Monday, supported by a reported drawdown of US oil inventories, potential European Union sanctions on Iran and possible OPEC production cuts.

But he added that Moscow would continue cooperating with OPEC on global crude production levels.

"We need to see how the situation develops in November and early December to better understand bot the current conditions and the market outlook", he said.

Futures in NY increased 0.3%, paring earlier gains of as much as 1.5%.

Alexander Novak, Russian Energy Minister, stated that Russia, which is not an OPEC member, meant to sign a partnership agreement with the group.

Here's a good chart from Bloomberg, it shows oil net shorts at the most-extreme since this time a year ago. Traders also seem to be expecting U.S.to take a tougher stance on Iran.

"Oil prices rose (last week) on hope OPEC and partners, will act to reverse bearish sentiment, but from a technical set up, bear mode remains intact", OANDA strategist Stephen Innes said. Total volume traded was about 5 percent below the 100-day average. The more-active January contract gained 16 cents to $56.84.

Weekly exchange data shows money managers hold a combined net long position equivalent to around 364 million barrels of USA and Brent crude futures and options, down from over 800 million barrels two months ago.

Russia's President Vladimir Putin said last week that "it is obvious that we should cooperate and we will cooperate" with OPEC, but refrained from commenting on whether there is need to reduce oil production.

On the trade war front, U.S. President Donald Trump said on Friday that China wants to make a deal on trade with the United States, but any pact has to be reciprocal.

Meanwhile, drillers in the U.S. added two more working rigs last week, bringing the total to 888, the highest level since March 2015, according to Baker Hughes data. US crude production has been rising, hitting a record in the week ended November 9, according to government data. Money managers have cut their net bullish Brent and WTI oil bets to the lowest in 17 months, weekly ICE Futures Europe and CFTC futures and options data on four contracts show. The Cboe/Nymex Oil Volatility Index fell more than 3 percent on Friday, declining for a third day.

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