Saudi Arabia in talks to cut crude output

  • Saudi Arabia in talks to cut crude output

Saudi Arabia in talks to cut crude output

Cailin Birch, analyst at the Economist Intelligence Unit, said a slowing oil demand is beginning to appear in China, the world's largest importer of crude oil.

Oil rose by more than 1 percent 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. After dozens of media reports claimed that Iranian oil exports had been falling sharply and steadily, data now suggests the fall has been less steep-a fact immediately weighing on oil prices.

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 US sanctions against Iran came into effect.

The country is targeting production capacity of 5m bpd in 2019, with average exports expected to reach around 3.8m bpd.

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.

"The recent drop in oil prices reflects a combination of factors".

Falih said the U.S. sanctions had removed less oil from the market than expected because of the waivers. 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 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. "I think those reports are going to be even weaker because they will have to adjust for the increase in US production", Jakob said. "The committee reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements", it said in a statement.

The rig count indicates USA crude output, already at a record 11.6 million bpd, will increase further.

But they climbed on Monday as the world's biggest supplier Saudi Arabia announced plans to cut production in response to fears of oversupply.

Any formal decision on production cuts by Opec would likely come at its next meeting, in Vienna on 6 December.

He said market sentiment had shifted from fears of shortages to worries about oversupply.

"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".

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

But producers eased output cuts in June after signs of a tighter market and higher prices, selling hundreds of thousands of extra barrels.

"If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further", the bank said in a note.