Saudi minister calls for 1 mn bpd global oil output cut

Lloyd Doyle
November 12, 2018

Major oil producers said on Sunday that crude supply next year would outstrip demand and signalled they may agree to production cuts when OPEC meets next month in Vienna.

OPEC and Russian Federation are set to discuss oil production cuts again, less than a month after both Alexander Novak and Khalid al-Falih assured markets they will ramp up production to offset any supply losses after USA sanctions against Iran came into effect.

USA energy firms had last week added 12 oil rigs in the week to November 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm had said on Friday.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).

"A new strategy needs to be formed, whether it's cuts or something else, it's not increasing production definitely".

The energy minister said: "There will need to be a reduction of supply from October levels approaching 1m barrels ..." Oman, a smaller member of the group, had said earlier it would support a cut by consensus of 1 million barrels a day.

Declines extended after the United States said on Monday it would allow eight countries to continue buying sanctioned Iranian crude, the Wall Street Journal reported. "Sanctions didn't cut so much out of the market as anticipated", he added.

The committee that oversees the 2016 OPEC+ agreement to manage supply met Sunday in Abu Dhabi.

"We are going to do everything we can to keep inventories and supply-demand fundamentals within a reasonably narrow band around balance", he said.

Khalid al-Falih's comments sparked a recovery in the price of worldwide benchmark Brent crude, which rose to $70.83 a barrel and is on course for its biggest increase in a month.

West Texas Intermediate crude also dropped to a nine-month low, below $60 a barrel.

The UAE's Mazrouei said the goal of OPEC and non-OPEC cooperation was to strike a balance in the market.

"I think it all comes down to Russian Federation", said Helima Croft, chief commodities strategist at RBC Capital Market LLC. "They seem to be sitting squarely on the fence about pulling the barrels back".

Saudi Arabia may also struggle to convince other producers to follow its lead.

Al-Falih said that demand for Saudi crude was weaker for the first time since the kingdom started boosting production in the May-June period. If Riyadh reduces daily exports by 500,000 barrels next month, it would effectively wipe out most of the production increases of the last six months. Turn about: Opec members and its 10 allies are mainly anxious about the increasing U.S. production (11.4 million barrels a day). "We're seeing some signs of this coming out of the U.S. We have not seen the signs globally, nor can we predict that they will persist into 2019".

Other reports by Iphone Fresh

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