Image: A/S Global Risk Management

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To cut or not to cut? The market is finding its feet after oil prices have dropped more than $20 over the past month (Brent), and OPEC members are re-introducing the thought of curbing oil production after months of supply shortage fears.

Growing concerns of the global economy are weighing on prices, and the recent huge drop in prices has likely made OPEC turn from increasing output in order to offset the missing Iranian barrels, to discussing the need for output cuts. In its monthly oil market report, published yesterday, OPEC estimated that global oil demand in 2019 would increase by 1.29 mio. barrels per day - a drop of 70,000 barrels per day compared to last month's report. Over the weekend, Saudi Arabia stated that the huge oil producer was considering an output cut next month. The statement made U.S. president put pressure on OPEC to continue the current production pace instead of curbing output. Witnessing waivers being granted to countries importing Iranian oil after months of supply shortage concerns has had its effect and now with supply disruptions under control, investors turn their attention to other issues such as expectations of falling consumption growth for 2019, the overall global economy, and the fear of an economic slowdown. This turnaround in market outlook from undersupply to possible oversupply has been sudden and the effects are clearly large in scale.

The weekly U.S. oil stocks data is a day delayed, i.e. the API report is published tonight and EIA tomorrow. Last week, crude oil stocks grew by 7.8 mio. barrels according to the API.

Turning to economic data, overnight Japanese and Chinese data came out mixed. Japanese GDP (YoY) was -1.2% versus 3.0% previous. Chinese Industrial Production improved slightly to 5.9% from 5.8% previously. Later today, Euro Zone GDP and U.S. Core CPI is published.