Saudi to cut oil exports by 500,000 barrels per day in December

Marco Green
November 13, 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.

"Hopefully, Saudi Arabia and OPEC will not be cutting oil production", Trump wrote on Twitter. "We are not in the business of pinpointing a price going forward".

OPEC and non-OPEC energy ministers are due to meet in early December in Vienna to assess the global market.

In light of these developments, the world's traditional oil leader and unofficial OPEC leader, Saudi Arabia, is seeking to boost oil prices in the near-term to win enough time before its sovereign wealth fund starts generating more substantial returns on its investments. Counterparts from Russian Federation and the United Arab Emirates echoed that sentiment. In the meantime, the Kingdom said it is taking the lead by cutting its output to 500,000 barrels a day come December.

The group's caution arises partly from the unpredictability of Iranian supply. However, the US has granted waivers to certain major importers of Iranian crude, diminishing the expected cuts. "Sanctions didn't cut so much out of the market as anticipated", he added.

"We're kind of back to square one: It must feel like November 2016 to them, a lot", said John Kilduff, a Partner at Again Capital Management in NY, referring to the time period when OPEC and its allies agreed to initiate production cuts.

Speaking in Abu Dhabi, he said that Saudi Arabia's announcement would now "probably firm the price".

Oil prices have fallen roughly 20% in the last month, driven lower by a rapid increase in global supply and the threat of a slowdown in demand - especially from countries such as India, Indonesia and China, whose currencies have weakened against the dollar and eroded their purchasing power.

"Saudi Arabia is flexible and will do what other countries agree to do".

November 12, 2018 West Texas Intermediate, the USA benchmark oil price, had been declining for the hour before the tweet and briefly dipped lower before trading at $60.14 a barrel, down 5 cents for the day at 1:49 p.m.in NY.

US West Texas Intermediate (WTI) crude futures were at $60.87 per barrel, up 68 cents, or 1.1 percent. Russia, by contrast, is in a more comfortable position, and Energy Minister Alexander Novak showed no sign he was ready to act immediately. The market should be balanced by the middle of next year, though there are forecasts for a surplus of 1 million to 1.4 million barrels a day, he said. He said the committee were reviewing the market and would draw up a plan to deal with the prospect of higher supply in 2019.

United States production has more than doubled over the last decade and surpassed 11 million barrels per day this summer.

"A new strategy needs to be formed, whether it's cuts or something else, it's not increasing production definitely".

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

Other reports by Click Lancashire

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