Saudi Arabia is reducing oil supply; OPEC may cut too

Jeannie Matthews
November 14, 2018

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

President Trump Monday afternoon sought to dissuade Opec from taking supply off the market in his latest tweet at the cartel.

He also made it a point to mention that they were not in the business of predicting future oil prices.

Saudi Arabia's 180 is good news for U.S. shale companies, especially high-debt frackers that are sensitive to price swings.

This may be the beginning of a stabilisation in the oil market after crude prices crashed by about 20% since early October.

"With Iranian waivers coming in higher than anyone expected, Saudi Arabia is acting responsibly by reducing its production that it had earlier brought online to offset possible Iranian losses", said Amrita Sen, chief oil analyst at Energy Aspects Ltd, a consultant in London.

Saudi Arabia and Russian Federation are close, especially as a result of their pact in late 2016, along with other OPEC and non-OPEC producers, to curb output by 1.8 million barrels per day in order to prevent prices dropping too far - but oil markets have changed since then, largely as a result. That appeared to be a veiled reference to Trump.

Al-Falih flew to Abu Dhabi for talks with OPEC and other producers on Sunday. Now "we're seeing the pendulum swing violently to the other side", he added.

The Saudis boosted production in November but will trim shipments for next month, Energy Minister Khalid Al-Falih told reporters in Abu Dhabi.

Oil prices fell more than 1 per cent on Tuesday, with benchmark Brent crude slipping below $70 per barrel and US crude under $60, after US President Donald Trump put pressure on OPEC not to cut supply to prop up the market.

Oil price drops amid fears over demand
In July, Trump called the organization a "monopoly", warning on Twitter that "gas prices are up & they are doing little to help". The decline in prices continued last week after the United States said it would let eight countries keep importing Iranian oil.

World leaders gather in Paris a century after WWI armistice
During the ceremony Sunday, Macron sat with Angela Merkel on his immediate right, with Trump just beyond the German Chancellor. A security breach occurred as the presidential motorcade traveled down the grand Champs-Élysées, which was closed to traffic.

People's Choice Awards 2018 Moments - Nicki Minaj, Shadowhunters
On Friday, she tweeted that flames had reached the property, but that the fire appeared to be "more contained". Jordan attractive and couldn't help herself at the People's Choice Awards last night.

"While the oil price has opened on a solid footing today, the knee-jerk reaction to the meeting is likely to subside in the short term until investors take solace in visible signs of a reduction in supply and OPEC lives up to the rhetoric of further supply cuts", said Aneeka Gupta, associate director at exchange-traded fund provider WisdomTree.

"We need a floor!"

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, he stressed that more study needed to be done. US crude turned negative and extended losses after the tweet.

"Don't be surprised if oil prices to react positively to this weekend's news".

"Many of us share this view", the minister said when asked about the need for a cut. In trading on Monday, benchmark oil contract Brent North Sea crude gained nearly a dollar.

The move is aimed at stabilising crude prices which have declined rapidly in recent times, thereby affecting the finances of OPEC members and global oil companies.

The current oil cut deal has been in effect since January 2017 till the end of the current year and envisages production cuts by 1.8 barrels a day on October 2016. USA production rose last week to a record 11.6 million barrels a day, and stockpiles rose by 5.8 million barrels, according to the Energy Information Administration.

Al-Jaber also said the UAE would begin fracking - injecting high-pressure mixtures of water, sand or gravel and chemicals - to gain access to otherwise unreachable natural gas reserves.

"I think this is a strategic relationship because it's useful to both countries". Khalid al-Falih´s comments followed a meeting in Abu Dhabi at the weekend, where major producers started laying the groundwork to cut supply in 2019, reversing an nearly year-long expansion.

OPEC and the International Energy Agency release their respective monthly reports on the outlook for oil supply and demand later this week.

Other reports by

Discuss This Article

FOLLOW OUR NEWSPAPER