As Trump Calls For Boost, Oil-Exporting Nations Eye Output Cuts

Jeannie Matthews
December 7, 2018

US President Donald Trump on Wednesday, December 5, urged OPEC members not to slash production at their upcoming meeting, saying global oil prices should remain low.

Iraq's oil minister says he is confident that officials from major oil-producing countries will reach an agreement that will help stabilize the price of crude.

Falih said a production cut of 1.3 million barrels per day is "excessive" in light of Alberta's decision this week to cut 325,000 bpd in order to drain the Canadian province's brimming stockpiles of crude.

Possible output cuts by OPEC and its allies ranged from 0.5-1.5 million bpd, and 1 million bpd was acceptable, the Saudi energy minister said Thursday.

"While the large crude oil inventory drop was notable, the surge in exports of crude oil to over 3 million barrels per day was remarkable", said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.

Events in the Austrian capital weren't the only story on Thursday. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd.

Iran, Saudi's regional rival and fellow OPEC member, has resisted any notion of cutting its output as its crude exports are being pinched already by US sanctions.

OPEC members are meeting in Vienna to discuss ways to raise worldwide oil prices.

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The price of crude has fallen nearly a third since October but Trump has demanded OPEC make oil even cheaper by refraining from output cuts.

OPEC's de facto leader Saudi Arabia has indicated a need for steep output reductions from January, fearing a glut, but Russian Federation has resisted a large cut, news agency Reuters reported from Vienna.

Saudi Arabia has been calling steep cuts in oil output and was expected to raise those demands during the meeting, but pressure from the US may convince Saudi leaders to take a softer tone.

"If you look at the Canadian producers, when you're looking at the wide spreads of the Western Canadian Select versus WTI, you look at some of the real cost to get some of the crude out of the Bakken because the pipelines are full - I think we are going to start seeing a slowdown in drilling if they don't see some prices turn around", Heminger warned, but noted that he doesn't expect the slowdown to be "dramatic".

U.S. President Donald Trump tweeted Wednesday that "Hopefully OPEC will be keeping oil flows as is, not restricted". But they're contending with vociferous opposition from the US president, who's taken to using his Twitter account to berate the group's policies and sees low oil prices as key to sustaining America's economic growth. If Russia does agree a cut, it would take three to four months to fully implement it, he said.

The price of oil has fallen about 25 percent because major producers - including the US - are pumping oil at high rates.

The last time the OPEC+ group agreed to curtail output, in late 2016, it settled on a combined 1.8 million-barrel-a-day reduction.

So it expected, as it generally does, other Opec members to make some sacrifice, but it also wanted Russian Federation involved. They are fully aware of the risks of another severe supply glut developing if they take no action.

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