Saudi Arabia seeks 1 million bpd cut in oil production

Cornelia Mascio
Novembre 13, 2018

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", Falih added.

Falih said Saudi Arabia, the world's largest oil supplier, would cut its production by 500,000 bpd as of next month to help stabilise the market. It's a concern shared by OPEC Secretary-General Mohammad Barkindo, who said Monday that the market balance is under threat from surplus supply and dwindling demand.

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

Major producers, including Russian Federation and Saudi Arabia, on Sunday warned that crude supply would outstrip demand next year at a joint OPEC non-OPEC ministerial monitoring committee meeting in Abu Dhabi.

Russian Energy Minister Alexander Novak told reporters that the market may face a specific oversupply due to seasonal factors in the next few months, but it will be balanced by 2019.

Global oil producers - including OPEC and Russian Federation - pump out roughly 100 million barrels of oil per day, so a 1% cut in production might not seem like a big deal.

A cut of that magnitude would reverse a decision in June by OPEC and Russian Federation to pump over a million barrels per day more to make up for the expected loss of Iranian exports.

Brent crude dropped below $70 a barrel on Friday for the first time since April, while the New York's West Texas Intermediate (WTI) sank below $60 a barrel, a nine-month low. Turn about: Opec members and its 10 allies are mainly anxious about the increasing USA production (11.4 million barrels a day).

Earlier Falih said oil-producing countries have not yet reached an agreement on cutting output.

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

The exporters' group, which had reversed output restrictions in place last year to boost production to temper a three-year rally in oil prices to around $80 (Dh294) per barrel this year, is now looking to resort to a strategy to curb output.

The United States has upped production of shale oil, while Saudi Arabia, Russia and others have raised supplies of crude amid signs of slowing demand.

Falih said the USA sanctions had removed less oil from the market than expected because of the waivers.

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

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

"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".

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