Major oil producers to consider output cuts after price slide

Tuesday, 13 Nov, 2018

The world's second and third crude producers - after they were overtaken by the United States thanks to shale oil - Russian Federation and Saudi Arabia are the core of an alliance of producer nations that succeeded in solidifying oil prices after the 2014 crash.

US West Texas Intermediate (WTI) crude oil futures were at $60.73 per barrel, up 54 cents, or 0.9 percent from their last settlement.

UAE Energy Minister Suhail al-Mazrouei, left, listens to Khalid Al-Falih, Saudi Energy and Oil Minister, in the opening ceremony of the Abu Dhabi International Exhibition & Conference, ADIPEC, in Abu Dhabi, United Arab Emirates, Monday, Nov.12, 2018.

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

Oil producers will continue to evaluate the market data prior to the Vienna summit, "but if we need to trim production by one million bpd, we will do", he added.

An official from Kuwait, also an OPEC member, on Monday said that major oil exporters over the weekend had "discussed a proposal for some kind of cut in (crude) supply next year", although the official did not provide any detail. This comes as the USA imposed sanctions on Iran are directly impacting the global oil market, creating an outcome that many countries did not foresee.

U.S. energy firms had 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 had said on Friday.

Saudi Arabia will reduce oil supply next month in response to lower demand, and more cuts could follow next year.

"Saudi Arabia is flexible and will do what other countries agree to do".

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

One of OPEC's biggest problems right now is the surge in USA output.

"In the short term, this is a positive for oil, but we must question the impact over the longer term unless it's the sign of more to come from OPEC", said Markets.com Market Analyst Neil Wilson.

Note that although the Iranian sanctions have taken effect, the American Government has now given waivers to eight of the country's customers, thereby going against its earlier insistence on cutting off all of Iran's oil from the global oil market.

Opec secretary-general Mohammed Barkindo said at the meeting that conformity on the earlier output increases, which had been in place since May, was at 104 per cent for the month of October.

This has left OPEC scrambling to adjust its own output, which, at around 33.3 million bpd, accounts for roughly a third of global supply. The UAE now produces some 3 million barrels of oil a day.