Oil prices rise by more than 1% after Saudi announcement

Mae Love
November 13, 2018

Russia's Novak said it's "hard to say" if oil markets will be over-supplied next year.

Emerging currencies fell on Monday as the American greenback built on last week's gains and hit a 16-month high, while oil prices rose after Saudi Arabia announced plans to slash production in December. We need to steady the ship and steady the market further. The cut represents a reduction in global oil supply of about 0.5 per cent. Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).

After a meeting in Abu Dhabi, several oil producers - including those not part of OPEC - said they had "reviewed the current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements".

Falih said any decision would be voted on at an upcoming OPEC meeting in Vienna, Austria on December 6.

Since then, OPEC production has risen 820,000 bpd since May, according to the latest S&P Global Platts OPEC survey.

Russian Federation is now pumping about 10,000 to 20,000 barrels a day below October levels, and demand from customers is "fairly stable", Novak said.

US West Texas Intermediate (WTI) crude futures were at $60.87 per barrel, up 68 cents, or 1.1 percent.

"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the USA, more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP before the meeting.

But producers ended up cutting more - partly due to unexpected outages in Venezuela, Libya and Angola - and so agreed in June to limit cuts to the agreed level, meaning restoring about 1 million bpd in output.

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The UAE's energy minister, Suhail al-Mazrouei, said balancing the market would "require changes in the strategy" of producers. Commerzbank, Germany's second-largest lender, said on Friday that oil producers must act to prevent prices tumbling.

While Riyadh has chose to lower production, the rest of the attendees did not come to a consensus on the matter, according to Falih.

When asked about the possibility of an output cut, he insisted it was "premature to talk about a specific action".

"We want to enter 2019 with a minimum amount of stocks", Falih said.

This time, Saudi Arabia is urging allies to focus on the risk of rising oil inventories and forecasts for massive growth in rival supplies next year including US shale. After dozens of media reports claimed that Iranian oil exports had been falling sharply and steadily, data now suggests the fall has been less steep-a fact immediately weighing on oil prices.

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

But at the same time, OPEC members need prices that are low enough to stimulate demand from buyers.

"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".

Commerzbank, Germany's second-largest lender, said Friday oil producers must act to prevent a free fall of prices.

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