Saudi minister calls for 1 mn bpd global oil output cut

12 November, 2018, 18:00 | Author: Eric Barnett
  • Saudi Arabia’s Energy Minister Khalid Al-Falih

Oil rose by more than 1 per cent on Monday, set for its largest one-day increase in a month after Saudi Arabia said OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day.

The proposed reduction is from October production levels, Falih said. Brent crude dropped below $70 a barrel on Friday for the first time since April, while the New York's West Texas Intermediate sank below $60 a barrel, a nine-month low.

Saudi Arabia plans to reduce oil supply to world markets by 0.5 million barrels per day (bpd) in December, its energy minister had said on Sunday, as the OPEC power faces uncertain prospects in getting other producers to agree to a coordinated output cut.

The meeting, which will also be attended by the oil ministers of Kuwait, Venezuela and host nation the UAE, is not due to make decisions but will most likely send signals.

It was "premature to talk about a specific action", he told reporters, asked about the possibility of an output cut to support sliding prices.

Major oil producers meet in Abu Dhabi on Sunday to consider reverting to output cuts after a sharp slide in crude prices revived fears of a 2014-style crash.

"Oil-importing emerging economies' currencies would likely react negatively to a cut in OPEC output given Iranian oil exports are already likely to wane over time under the impact of US sanctions", said Mansoor Mohi-uddin, the Singapore-based head of foreign-exchange strategy at NatWest Markets.


Falih said the U.S. sanctions had removed less oil from the market than expected because of the waivers.

"With Iranian waivers coming in higher than anyone expected, Saudi Arabia is acting responsibly by reducing its production that it had earlier brought online to offset possible Iranian losses", said Amrita Sen, chief oil analyst at Energy Aspects Ltd, a consultant in London.

"We have to study all the factors", he said.

"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the United States, more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP.

Opec and its allies outside the exporters' group, led by Russian Federation, met in the UAE capital to recalibrate their strategy of expanding production following a bearish turn of the markets last week.

The latest price slump comes after the United States boosted production of shale oil, while Saudi Arabia, Russia and others raised supplies of crude amid signs of slowing demand.

Commerzbank, Germany's second-largest lender, said Friday oil producers must act to prevent a free fall of prices.

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