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Brent crude jumps to $71.59/barrel as Saudi Arabia announces supply cut

12 November 2018

Falih had stated that OPEC may need to cut output because oil markets may see an oversupply again next year.

Saudi Arabia specifically clamoured for an immediate cut by OPEC producers to a daily output of one million barrels starting early next year.

"The Kingdom's crude exports for December will be 500,000 bpd lower than November", Saudi Energy Minister Khalid Al-Falih told reporters at the meeting in Abu Dhabi.

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

Oil prices have shed a fifth of their value over the past month due to oversupply and signs of a softer-than-expected impact from U.S. sanctions on Iranian crude exports.

The Saudis said they would decrease the oil supply by as much as 500,000 bpd as soon as in December - albeit other OPEC member-states and their allies, such as Russian Federation, have yet to announce their position on the proposed cuts.

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

"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".

Oil collapsed into a bear market in little more than a month, and pressure is mounting on the OPEC+ group to act sooner than their policy meeting in December. He said the committee were reviewing the market and would draw up a plan to deal with the prospect of higher supply in 2019.

While Riyadh has chose to lower production, the rest of the attendees did not come to a consensus on the matter, according to Falih.

Fear of a global economic slowdown and a decision by the United States to allow some countries to keep buying Iranian crude oil following the reintroduction of sanctions have hit market sentiment.

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

"Iran's armed forces.are prepared today as in the past to protect our fleet of oil tankers against any threats so that it can continue to use marine waterways", said Rear-Admiral Mahmoud Mousavi, a deputy commander of the regular armed forces, according to the semi-official news agency ISNA.

Brent crude dropped below United States dollars 70 a barrel on Friday for the first time since April while the New York's West Texas Intermediate (WTI) sank below USD 60 a barrel, a nine-month low.

In his speech at the start of the meeting, Falih said the recent sharp drop in prices had "surprised us".

Brent crude jumps to $71.59/barrel as Saudi Arabia announces supply cut