From Reuters on November 12, 2018
Saudi Energy Minister Khalid al-Falih said on Monday OPEC and its allies agree that technical analysis shows a need to cut oil supply next year by around 1 million barrels per day (bpd) from October levels to balance the market.
Speaking at an industry event in Abu Dhabi, he said demand from Saudi Arabia’s customers in December would fall by more than half a million bpd compared with November and there was a consensus not to allow oil inventory to build up.
Oil prices rose more than 1 percent on Monday, set for their largest one-day increase in a month after the Saudi comments.
“If all things remain equal, and they almost certainly will not as things will change – it is a dynamic market – then the technical analysis we saw yesterday …. tells us that there will need to be a reduction of supply from October levels approaching a million barrels,” Falih said.
“The consensus is that we need to do whatever it takes to balance the market. If that means trimming supplies by a million (bpd), we will.”
U.S. sanctions against Iran had removed less oil than expected from the market, Falih said. Washington has granted exemptions to Iran’s biggest buyers.
“Sanctions didn’t cut so much out of the market as anticipated,” Falih said.
Saudi-led OPEC and its allies including Russia decided in June to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump to reduce oil prices and make up for supply losses from Iran.
Oil prices have since come under downward pressure from rising supplies, despite the new U.S. sanctions on Iran. Forecasts of a 2019 supply surplus and slowing demand have also dented the market.
Falih said Saudi Arabia was not preparing for a breakup of the Organization of the Petroleum Exporting Countries and believed the group would long remain the global central bank for oil.
Saudi Arabia’s top government-funded think-tank has been studying the possible effects on oil markets of a breakup of OPEC, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Falih said the think-tank was just trying “to think outside the box” and analyze all scenarios.
“OPEC is essential for the stability of oil markets,” he said.
On Sunday, Falih had announced plans by Saudi Arabia to reduce oil supply to world markets by 500,000 bpd in December as the country faces uncertain prospects in getting other producers to agree to a coordinated output cut.
Falih told reporters that state oil company Saudi Aramco’s customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 percent.
OPEC
Re: OPEC
From Bloomberg
President Donald Trump criticized Saudi Arabia’s announced plan to cut oil production on Monday, as tensions rose between the U.S. and its long-time Middle East ally.
“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” Trump said in a tweet.
West Texas Intermediate, the U.S. 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 New York.
Saudi Arabia’s energy minister said earlier Monday that OPEC and its allies should reverse about half the increase in oil output they made earlier this year. Oil futures in New York had gained as much as 2.4 percent in London and 1.8 percent in New York after the Saudi announcement.
Trump’s tweet comes one week after the U.S. reimposed sanctions on Iran’s oil industry. The administration had been counting on Saudi Arabia to assure oil supply to prevent a run-up in prices.
The two countries have clashed over the October killing of U.S.-based journalist Jamal Khashoggi at the Saudi consulate in Istanbul. Over the weekend, the U.S. stopped its refueling support for the Saudi-led coalition fighting against Houthi rebels in Yemen.
Trump’s attention Monday was on financial markets. Earlier in the day, he blamed a drop in the U.S. stock market on the looming threat of investigations into his administration by Democrats, who last week won control of the House of Representatives.
Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi. The kingdom will reduce shipments by about half that amount next month, making its second policy U-turn after a summer surge in prices was followed by a swift collapse into a bear market this month.
In June, Saudi Arabia persuaded fellow oil producers to end 18 months of production cuts and pump more crude in response to falling output in Venezuela and Iran.
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 U.S. shale. It’s a concern shared by OPEC Secretary-General Mohammad Barkindo, who said Monday that the market balance is under threat from surplus supply and dwindling demand.
“It is beginning to look alarming in the sense that the resurgence of non-OPEC supply — in particular shale oil from the United States — is putting a lot of pressure on this fragile equation,” Barkindo said in Abu Dhabi.
President Donald Trump criticized Saudi Arabia’s announced plan to cut oil production on Monday, as tensions rose between the U.S. and its long-time Middle East ally.
“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” Trump said in a tweet.
West Texas Intermediate, the U.S. 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 New York.
Saudi Arabia’s energy minister said earlier Monday that OPEC and its allies should reverse about half the increase in oil output they made earlier this year. Oil futures in New York had gained as much as 2.4 percent in London and 1.8 percent in New York after the Saudi announcement.
Trump’s tweet comes one week after the U.S. reimposed sanctions on Iran’s oil industry. The administration had been counting on Saudi Arabia to assure oil supply to prevent a run-up in prices.
The two countries have clashed over the October killing of U.S.-based journalist Jamal Khashoggi at the Saudi consulate in Istanbul. Over the weekend, the U.S. stopped its refueling support for the Saudi-led coalition fighting against Houthi rebels in Yemen.
Trump’s attention Monday was on financial markets. Earlier in the day, he blamed a drop in the U.S. stock market on the looming threat of investigations into his administration by Democrats, who last week won control of the House of Representatives.
Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi. The kingdom will reduce shipments by about half that amount next month, making its second policy U-turn after a summer surge in prices was followed by a swift collapse into a bear market this month.
In June, Saudi Arabia persuaded fellow oil producers to end 18 months of production cuts and pump more crude in response to falling output in Venezuela and Iran.
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 U.S. shale. It’s a concern shared by OPEC Secretary-General Mohammad Barkindo, who said Monday that the market balance is under threat from surplus supply and dwindling demand.
“It is beginning to look alarming in the sense that the resurgence of non-OPEC supply — in particular shale oil from the United States — is putting a lot of pressure on this fragile equation,” Barkindo said in Abu Dhabi.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group