Published: Mon, November 12, 2018
Economy | By

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

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

OPEC and Russian Federation are set to discuss oil production cuts again, less than a month after both Alexander Novak and Khalid al-Falih assured markets they will ramp up production to offset any supply losses after USA sanctions against Iran came into effect.

During a meeting in Baghdad, Iraq and Saudi Arabia's oil ministers also discussed an electricity grid connection between the two countries to meet Iraq's power needs, he said.

The Organization of the Petroleum Exporting Countries (OPEC), which is led by Saudi Arabia, agreed in June with a bloc of 10 petroleum-producing nations led by Russian Federation, to increase global supply by one million bpd.

Suheil al-Mazrouei, energy minister of the host country UAE, hinted that producers are preparing to cut output.

Opec's de-facto leader Saudi Arabia meanwhile said it would draw back its exports for the month of December to the tune of 500,000 bpd as it anticipates lower winter demand.

Earlier this week, Iraq's Oil Minister Thamer Ghadhban said the country plans to increase its oil output and export capacity in 2019, with a focus on the southern oilfields, and is close to reaching a deal with worldwide companies. "We need to look at 2019 with the view to keeping the markets balanced".

The proposed reduction is from October production levels, Falih said.

U.S. West Texas Intermediate (WTI) crude oil futures were at 60.73 dollars per barrel, up by 54 cents, or 0.9 per cent from their last settlement.


Cailin Birch, analyst at the Economist Intelligence Unit, said a slowing oil demand is beginning to appear in China, the world's largest importer of crude oil.

Ahead of the meeting, he acknowledged that so far there was no new deal to cut production among OPEC and non-OPEC producers, who struck an agreement in late 2016 to cut output by 1.8 million bpd to tackle an oversupply crisis.

"We have to study all the factors", Falih said.

"The recent drop in oil prices reflects a combination of factors".

The slide also comes during signs of a softer-than-expected impact from United States sanctions on Iran oil exports.

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

"Saudi Arabia has stepped in front of the oil market bears, proactively announcing they will reduce exports", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

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