Major oil producers foresee oversupply, edge closer to production cuts

Saudi Arabia to cut December oil exports by 500000 bpd

Oil's Bear Market Pushes OPEC+ Closer to Cuts

Saudi Arabia's energy minister said oil-producing nations should cut output by one million barrels per day to re-balance the market.

Although OPEC was unable to reach an agreement with other non-OPEC producers who also attended the Sunday meeting, OPEC made it known that it is going ahead with the proposed cuts come next year.

Meeting to examine how to curb a sharp slide in oil prices, the producers said they "reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements".

Saudi Arabia, the world's largest oil exporter, said on Sunday it would cut its shipments by half a million barrels per day in December due to seasonal lower demand.

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

OPEC and its allies will meet in Vienna on December 6-7 to decide on output policy for 2019.

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

"OPEC+ nations sent a clear signal they are concerned rising supply and weaker demand may keep pushing oil prices down", said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University in NY.

Production from Saudi Arabia, Russia and the United States alone has risen by 1.05 million bpd in the last three months, based on official output figures.

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Iranian media reported his remarks as a threat against Iranian tankers that carry Iran's crude and oil products.

In this light, Saudi Arabia has announced a new round of output cuts aimed at supporting the prices - which are, in the near-term, still expected to remain at that country's fiscal breakeven, estimated at roughly $70/bbl.

Brent crude dropped below United States dollars 70 a barrel on Friday for the first time since April while the New York's West Texas Intermediate (WTI) sank below USD 60 a barrel, a nine-month low.

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

Decision comes amid fears of oversupply. Crude prices have dropped approximately one-fifth since early October.

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

Saudi Arabia, the world's top oil exporter, has been pumping 10.7m bpd since October, according to Falih.

"Oil-importing emerging economies' currencies would likely react negatively to a cut in OPEC output given Iranian oil exports are already likely to wane over time under the impact of USA sanctions", said Mansoor Mohi-uddin, the Singapore-based head of foreign-exchange strategy at NatWest Markets.

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