Will oil price shoot up again?

Ivan Schwartz
November 13, 2018

Oil prices rose 1.5% on Monday, a day after Saudi Arabia's Energy Minister Khalid al-Falih said the kingdom would reduce oil exports by half a million barrels a day in December, Reuters reported. In June, it persuaded fellow producers to end 18 months of production cuts and pump more crude in response to falling output in Venezuela and Iran and pressure over prices from U.S. President Donald Trump.

Saudi Arabia has been pumping 10.7 million bpd since October, Falih said.

The swift change in rhetoric follows signs of weaker demand and growing supply, the classic combination that served a blow to bullish traders, with benchmarks slipping into a bear market inside a month.

Brent crude oil prices jumped 2 per cent on Monday after top exporter Saudi Arabia announced a supply cut in December, a measure likely aimed at halting a market slump that has seen crude decline by 20 per cent since early October.

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", he added. But even just signalling that producers could cut production by 1% can make a huge difference in energy markets and beyond.

Russian Federation stated on Sunday that it did not believe that the oil market would face a probability of an oversupply next year.

"Many of us share this view", the minister said when asked about the need for a cut.

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US West Texas Intermediate (WTI) crude oil futures were at $60.73 per barrel, up 54 cents, or 0.9 percent from their last settlement.

In a final statement, they said they had "reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements". Turn about: Opec members and its 10 allies are mainly anxious about the increasing USA production (11.4 million barrels a day).

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

He said market sentiment had shifted from fears of shortages to worries about oversupply.

Declines extended after the United States said on Monday it would allow eight countries to continue buying sanctioned Iranian crude, the Wall Street Journal reported. This is necessary because OPEC members like Nigeria need crude prices to remain high for obvious reasons, one of which being the fact that there are budgets to be financed. He also said oil prices should be much lower based on supply.

Commerzbank, Germany's second-largest lender, said Friday that oil producers must act to prevent prices tumbling.

Other reports by GizPress

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