How Saudi Arabia is throwing its weight around in oil markets today

Lloyd Doyle
November 13, 2018

Khalid al-Falih told reporters that Saudi Aramco's customer crude oil nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand.

The fall in price was attributed to the lower impact of US sanctions on Iran due to the exceptions it gave to India, China and other nations, as well the increased oil production by the US, Saudi Arabia and Russian Federation.

But Russia appears to need more convincing that it should be cutting production again.

The world's second and third crude producers - after they were overtaken by the United States thanks to shale oil - Russian Federation and Saudi Arabia are the core of an alliance of producer nations that succeeded in solidifying oil prices after the 2014 crash.

The kingdom's energy minister, speaking after a meeting of Opec at the weekend, said the cartel believed that production would need to fall by almost 1m barrels per day (bpd) on October levels.

The group, including Russian Federation and Saudi Arabia, warned that crude supply would outstrip demand next year.

US West Texas Intermediate (WTI) crude futures were at $60.87 per barrel, up 68 cents, or 1.1 percent.

Oil prices have plummeted over the last month, falling by around 20 percent as global supply increased.

"A new strategy needs to be formed. whether it is a cut in production or something else, but it will not be an increase in production", he said.

Suheil al-Mazrouei, energy minister of the host country UAE, hinted that producers are preparing to cut output.

Saudi Arabia and Russian Federation, traditional arch-rivals have since 2016 worked in sync to counter USA shale, joining hands last year to remove a five-year inventory level by undertaking 1.8 million bpd of cuts.

Falih said they would then decide whether to adjust production and by how much.

Since then, OPEC production has risen 820,000 bpd since May, according to the latest S&P Global Platts OPEC survey.

"With the Iranian sanctions not being as severe as initially feared, officials from the OPEC and non-OPEC producers may discuss at the weekend the need to bring compliance back down. or risk another 2014-style slide in prices".

Russian Federation stated on Sunday that it did not believe that the oil market would face a probability of an oversupply next year.

"I think it all comes down to Russian Federation", said Helima Croft, chief commodities strategist at RBC Capital Market LLC. So, we know that supply is going to be reduced and in the medium term we can expect higher oil prices.

"We want to enter 2019 with a minimum amount of stocks", Falih said. They worry that a continued fall in crude oil price will cause a 2014-16 style oil crash when oil price dropped 70%, in large part due to the United States shale oil boom.

Other reports by Iphone Fresh

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