Saudi minister calls for 1 mln bpd global oil output cut

Darnell Taylor
November 13, 2018

Oil prices had strengthened earlier in the session, after Saudi Arabia said the Organization of the Petroleum Exporting Countries and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day next year.

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 USA sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday.

There have also been signs that renewed United States sanctions on Iranian oil exports may have a softer-than-expected impact. "Sanctions didn't cut so much out of the market as anticipated", he added.

The oil price has fallen by around 20 per cent in the last month, driven lower by a rapid increase in global supply and the threat of a slowdown in demand, especially from those customers, such as India, Indonesia and China, whose currencies have weakened against the dollar and eroded their purchasing power.

Saudi Arabia pumps about 10.4 million barrels of oil each day, with production decisions set at the national level and in coordination with OPEC.

However, market participants say the global energy market could see another period of excessive supply of crude oil as soon as next year - with oil bulls looking at Bakken anxiously. The oil producers could agree (though Russian Federation doesn't want to) to reduce the output to somewhere between the May and October figure (say a cut of up to 1 million) - cutting all the way to May level may attract the wrath of Donald Trump.

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

South Korea-US military drills violate agreements: North Korea media
He stressed that sanctions will remain in place until the North Koreans follow through. They plan to jointly verify the results in December.

But the highs and lows of the market need to end for both oil consumers and producers to profit, said al-Rumhy, the Omani official.

Ahead of the meeting, he acknowledged that so far there was no new deal to cut production among OPEC and non-OPEC producers, who struck an agreement in late 2016 to cut output by 1.8 million bpd to tackle an oversupply crisis.

Kazakh deputy energy minister Magzum Mirzagaliyev told reporters in Abu Dhabi that he understood Saudi Arabia was suggesting using August-October output levels as a baseline for determining cuts. He noted that in 2015 when OPEC lifted its output by about 2 million barrels a day, just over 2% of global demand at the time, oil prices decreased by roughly a third, while oil stocks experienced a simultaneous plunge.

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

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

Dudley said the waivers had been unexpected, so the market had been readjusting.

Commerzbank, Germany's second-largest lender, said Friday that oil producers must act to prevent prices tumbling.

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