Brent crude jumps 2 pct on Saudi December supply cut

Dwayne Harmon
November 14, 2018

Before the United States re-imposed sanctions on Iran, "fear and anxiety gripped the market", al-Falih said at the Abu Dhabi International Petroleum Exhibition & Conference.

In a tweet, he said he hopes Saudi Arabia and OPEC will hold back on production cuts and that oil prices should be much lower based on supply.

Saudi Energy Minister Khalid Al-Falih said Monday that producers need to cut about 1 million barrels a day from October output levels. They fell below the 60-dollar mark. "I think those reports are going to be even weaker because they will have to adjust for the increase in us production." . Iraq has successfully boosted production to a record, and its more fragile economy may make it loathe to reverse course. "So far I don't see any necessity for this".

Although OPEC was unable to reach an agreement with other non-OPEC producers who also attended the Sunday meeting, OPEC made it known that it is going ahead with the proposed cuts come next year. Oman, one of the smaller members of the OPEC, chipped in, stating that it would support a motion to cut oil supplies by 1 million barrels per day. USA crude oil exports averaged 2.4 million barrels per day, down by 80,000 barrels per day from the previous week. OPEC members may be weighing oil production cuts again, anxious that a slowing global economy will undermine prices, but in the group's Middle East heartland producers are spending billions to add output capacity for the long term.

Both oil price benchmarks have shed more than 20% in value since early October.

"One thing that is abundantly clear, OPEC is in for a shale shocker as USA crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

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BP (BP) CEO Bob Dudley said the Saudi cut represented "quite a bit of oil". The kingdom will reduce shipments by about half that amount next month, making its second policy U-turn after a summer surge in prices was followed by a swift collapse into a bear market this month.

Due to a glut two years ago that saw crude oil prices plunge to under US$30 a barrel from US$100, the major oil producers started cutting down output.

WTI dropped 0.89 US dollar to settle at 62.21 dollars a barrel, while Brent was down 1.04 dollars to close at 72.13 dollars a barrel.

"This announcement of at least Saudi Arabia reducing probably will firm the price", BP Chief Executive Officer Bob Dudley said in a Bloomberg TV interview.

However, the Trump administration has been reluctant to further punishing the Saudi side, citing alliance concerns and the role of Saudi purchase of USA military equipment in promoting jobs.

Earlier this week, Iraq's Oil Minister Thamer Ghadhban said the country plans to increase its oil output and export capacity in 2019, with a focus on the southern oilfields, and is close to reaching a deal with worldwide companies.

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