Saudi minister calls for 1 mln bpd global oil output cut

Daniel Fowler
November 13, 2018

Saudi Arabia, the world's largest oil exporter, said on Sunday it would cut its shipments by half a million barrels per day in December due to seasonal lower demand. "We are not in the business of pinpointing a price going forward".

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.

Kuwait, Iraq, Russia and the United Arab Emirates also boosted their output.

"There is no consensus yet among oil producers about cutting production", Falih said.

"Supply and demand is perhaps the easy part because you can measure it", al-Rumhy said.

"I think those reports are going to be even weaker because they will have to adjust for the increase in US production". "Sanctions didn't cut so much out of the market as anticipated", he added.

"Saudi Arabia has stepped in front of the oil market bears, proactively announcing they will reduce exports", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage in Oanda in Singapore.

The comments from the minister, Khalid al-Falih, show the balancing act the US allies face in dealing with President Donald Trump's actions related to the oil industry. The cut represents a reduction in global oil supply of about 0.5 percent.

November 12, 2018 West Texas Intermediate, the US benchmark oil price, had been declining for the hour before the tweet and briefly dipped lower before trading at $60.14 a barrel, down 5 cents for the day at 1:49 NY. Futures are still down about 18 percent from a 2014 high reached early last month.

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

Russian Federation pumps more than 11 million barrels per day.

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

Saudi Arabia may also struggle to convince other producers to follow its lead. If Riyadh reduces daily exports by 500,000 barrels next month, it would effectively wipe out most of the production increases of the last six months.

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

"We'll make sure we'll steer the global oil markets ... to make sure we don't jerk the oil markets into swinging either side", said Mr Al Falih. We've seen a pendulum swing from one side to the other.

Russia's Novak said it's "hard to say" if oil markets will be over-supplied next year.

USA energy firms last week added 12 oil rigs in the week to November 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

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

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