Oil prices climb after Saudi Arabia announces production cut

  • Oil prices climb after Saudi Arabia announces production cut

Oil prices climb after Saudi Arabia announces production cut

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after US sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday.

"Ideally, we don't like to cut", Al-Falih said.

After a meeting in Abu Dhabi, several oil producers - including those not part of OPEC - said they had "reviewed the current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements".

In a tweet Monday, the president said he hoped that Saudi Arabia and OPEC will not be cutting oil production.

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.

US President Donald Trump criticized Saudi Arabia's announced plan to cut oil production on Monday, as tensions rose between the US and its long-time Middle East ally.

Al-Falih said OPEC officials have seen analysis papers suggesting a production cut of upward of 1 million barrels of crude a day may be necessary to rebalance the market.

The market had anticipated that exports from OPEC member Iran would fall precipitously following the institution of USA sanctions in November.

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

A cut in oil exports by Saudi Arabia - or a rise in oil prices - does threaten to provide political ammunition to newly empowered Democrats who have long signaled skepticism of OPEC.

"One thing that is abundantly clear, OPEC is in for a shale shocker as U.S. crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year", Stephen Innes of financial services company Oanda said.

"Equities and oil were pretty much falling in lock-step", said Josh Graves, senior market strategist at RJO Futures in Chicago.

Worldwide benchmark Brent crude oil futures were at $71.11 per barrel at 0051 GMT, up 93 cents, or 1.3 percent from their last close. "The exemptions have even surprised Saudi Arabia as oil supplies from Iran are likely to spike in the coming days", he added. While they were willing to take that action to ease prices and shield themselves from attacks from the White House, many countries also need the value of a barrel to stay high enough to balance their budgets.

"Hopefully, Saudi Arabia and OPEC will not be cutting oil production".

"I think we would have to wait and see how the market is unfolding because our ultimate goal is market stability".

The caution of some other members of the group over whether respond swiftly to the recent price collapse arises partly from the unpredictability of Iranian supply amid USA sanctions.

"I think it all comes down to Russian Federation", said Helima Croft, chief commodities strategist at RBC Capital Market LLC.