Saudi Energy Minister Khalid al-Falih said on Monday global oil producers may have to reduce production by one million barrels per day - and his own country would take the lead.
Kristian Rouz - The shale oil boom in North Dakota's Bakken oil field continues to set new records, rendering U.S. crude prices lower, which, in the face of increasing U.S. energy exports, is poised to weigh on global oil prices as well. With oil wallowing in a bear market, OPEC and its allies gathered in Abu Dhabi on Sunday to weigh production cuts.
Oil rose by more than 1 per cent on Monday, set for its largest one-day increase in a month after Saudi Arabia said OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day.
Saudi Arabia had said the kingdom would cut its production by 500,000 barrels per day.
But the producer nations eased the output cuts in June after signs of a tight market and higher prices, allowing hundreds of thousands of extra barrels into the market.
Roughly two dozen oil exporting nations started capping production previous year amid fears about a global glut of crude oil.
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"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.
A majority of OPEC and allied oil exporters support a cut in the global supply of crude, Oman Oil Minister Mohammed bin Hamad al-Rumhi said on Sunday.
Brent crude dropped below 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. He said the committee were reviewing the market and would draw up a plan to deal with the prospect of higher supply in 2019.
"I think it all comes down to Russian Federation", said Helima Croft, chief commodities strategist at RBC Capital Market LLC. "If that means trimming supply by a million [barrels per day], we will do it". 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.
"This relief gives Iraq time to start taking steps towards energy independence", a video published on the US Embassy in Iraq's official Facebook page said. The administration had been counting on Saudi Arabia to assure oil supply to prevent a run-up in prices.
Several analysts said oil prices were likely to turn bullish again.