Global Markets: Oil Dips After Biggest Gain in 2 Months

(Bloomberg) — Oil fell after rising the most in almost two months as major oil exporters prepare to discuss output policy amid rising price volatility.

Futures in New York lost as much as 1 percent after a 2.4 percent gain Monday. All eyes are on this week’s G20 meeting in Argentina, which will include Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin, before OPEC meets next week in Vienna. Meanwhile, U.S. crude inventories are seen falling for the first time in 10 weeks in a Bloomberg survey before government data Wednesday.

Oil has collapsed into a bear market on fears of a supply glut amid a toxic mix of America’s unexpected sanctions waiver for Iranian oil, a record Saudi output and surging U.S. production. Also, rising trade tensions between the U.S. and China cloud the outlook for demand. Speculation is swirling over whether the Organization of Petroleum Exporting Countries and its allies will curb output when they meet on Dec. 6, despite President Donald Trump’s call for lower prices.

“A tug-of-war between President Trump and oil producers will continue through the OPEC meeting,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. “Oil could remain volatile until the meeting, which will determine the direction of prices.”

West Texas Intermediate for January fell as much as 52 cents to $51.11 a barrel on the New York Mercantile Exchange and traded at $51.25 at 4:20 p.m. in Tokyo. The contract rose $1.21 to $51.63 on Monday after plunging about 11 percent last week, the most since January 2016. Total volume traded was 16 percent above the 100-day average. The Cboe/Nymex WTI Volatility Index fell on Monday from the highest level since early 2016 reached last Friday.

Brent for January settlement slid 21 cents to $60.27 a barrel on London’s ICE Futures Europe exchange. The contract added $1.68 to at $60.48 on Monday. The global benchmark traded at a $8.97 premium to WTI.

The oil market is abuzz with talk that Prince Mohammed may not be able to defy Trump’s desire for lower oil prices after the White House supported him following the killing of Jamal Khashoggi. Saudi Arabia’s output hit a record 11.2 million barrels a day, said a person familiar with the matter.

Goldman Sachs Group Inc. forecast the G-20 meeting would be a potential turning point, while Citigroup Inc. said, with Brent below $60 a barrel, it’s in the interest of both the Saudis and Russia to either freeze production or take oil out of the market.

Meanwhile, nationwide crude stockpiles in the U.S. probably fell 1 million barrels last week after nine consecutive weeks of gains, the median estimate in the Bloomberg survey shows. Inventories in the Cushing storage hub in Oklahoma probably added 600,000 barrels last week, according to a separate Bloomberg survey.

To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Sungwoo Park, Ovais Subhani