Russia and Saudi discuss cutting oil output in 2019
Russia and Saudi Arabia are discussing reducing their levels of oil output.
According to various reports citing Russia's TASS news agency, which cited an unnamed source, the two countries had begun discussing that possibility.
The reports followed the move in front month Brent crude oil futures below their so-called 200-day moving average during the week before, a move which often heralds further price weakness over the near term.
However, it also quite often triggers talk of output cuts from the Organisation of Petroleum Exporting Countries's members.
Against that backdrop, on Tuesday, analysts at Morgan Stanley lowered their forecast for the price of Brent oil out to mid-2019 to $77.5 per barrel, versus $85.0 previously, citing increased output from the US, Russia, Saudi, Libya and a slower reduction in exports from Iran among the factors leading them to modify their forecasts.
On the back of all of the above, the investment bank went from forecasting undersupply of between 0.2-0.3m barrels a day until end-2019 to projecting an oversupply of the same amount.
Nevertheless, Brent prices were seen recovering to $85 a barrel by early 2020.
To take note of, and for Iran, Morgan Stanley bumped-up its forecasts for oil supplies from Tehran by 0.2m b/d for the last quarter of 2018 and 2019 to reach 2.7m b/d and 2.5m b/d, respectively, versus output of about 3.8m b/d earlier in 2018, on the back of Washington's decision to grant waivers from sanctions to eight of Iran's main customer countries.
A ministerial committee comprising some OPEC members and their allies, including Russia and Saudi Arabia, was scheduled to meet on Sunday in Abu Dhabi to discuss the market and the outlook for prices next year.
As recently as June, a group of OPEC members plus Moscow had decided to ease the output curbs which had been in place since 2017, in part following pressure from the US administration.
From a technical standpoint, traders were looking at the $77 per barrel level on Brent futures to see if the contract was capable of reclaiming the lower part of a recently abandoned upwards price channel dating from summer 2017.
If Brent futures failed to do so, then the selling pressure might accelerate, according to Jose Maria Rodriguez, WebFG UK's chief technical analyst.