Oil markets struggle to find footing after 7% slump

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U.S. crude oil output from its seven major shale basins is expected to hit a record 7.94 million barrels per day (bpd) in December, the U.S. Department of Energy's Energy Information Administration (EIA) said on Tuesday.

Non-Opec oil supply will surge by 120,000 bpd next year and the US, Canada, Kazakhstan and Russian Federation will lead the group of countries contributing to this increase.

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.

"Although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market", OPEC said in the report.

Saudi Energy Minister Khalid al-Falih said on Monday OPEC agreed there was a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to prevent oversupply.

In its monthly report on Tuesday, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive forecast cut.

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President Donald Trump has tweeted that they shouldn't cut production, setting up a standoff between the USA administration and OPEC before it meets in Vienna on December 6. The oil cartel said it would start withholding crude in 2019 to tighten supply and prop up prices.

Spot prices in September were significantly higher than those for later delivery, a structure known as backwardation that implies a tight market as it is unattractive to put oil into storage.

Brent is in so-called "bear market" territory alongside United States crude as it has fallen by more than 20% since its peak - $86 in early October.

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. Those lower prices likely quieted Trump, but production cuts could again boost prices at the pump.

In addition to Trump's tweet, the price of oil has come under pressure because of fears that weakening economies outside of the US could diminish demand. Oil prices have fallen for the 12th straight session in its longest losing run on record. Russian oil minister Alexander Novak said his country was open to cuts, at a meeting of oil producers in Abu Dhabi. Brent crude was at $65.89 a barrel, over 20 percent lower than in early October. Output, however, rose by 127,000 bpd to 32.9 million bpd, OPEC said.

With the U.S. now the world's top oil producer ahead of Saudi Arabia and Russian Federation, there are indications that traders will keep selling crude at lower prices as a result of oversupply.

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