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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.
Brent crude futures <LCOc1> rose 80 cents on the day to $70.98 a
barrel by 1205 GMT, while U.S. crude futures rose 36 cents to
$60.69 a barrel.
Saudi Energy Minister Khalid al-Falih said on Monday OPEC and
its partners agree that technical analysis shows a need to cut
oil supply next year by around 1 million bpd from October levels
to avoid an unwelcome build-up of unused crude.
"The balances for 2019 do show, especially in the first half of
the year, that there will be significant global oversupply,"
Petromatrix analyst Olivier Jakob said.
The Organization of the Petroleum Exporting Countries and the
International Energy Agency release their respective monthly
reports on the outlook for oil supply and demand later this
week.
"OPEC and the IEA are releasing their updates to the oil market
this week and the outlook for 2019 was already on the weak side.
I think those reports are going to be even weaker because they
will have to adjust for the increase in U.S. production," Jakob
said.
The oil price has fallen by around 20 percent in the last month,
driven lower by a rapid increase in global supply and the threat
of a slowdown in demand, especially from those customers, such
as India, Indonesia and China, whose currencies have weakened
against the dollar and eroded their purchasing power.
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.
This has left OPEC scrambling to adjust its own output, which,
at around 33.3 million bpd, accounts for roughly a third of
total global daily supply.
An official from group member Kuwait said on Monday major oil
exporters had over the weekend "discussed a proposal for some
kind of cut in (crude) supply next year", although the official
did not provide any detail.
One of OPEC's biggest problems right now is the surge in U.S.
output.
"One thing that is abundantly clear, OPEC is in for a shale
shocker as U.S. crude production increased to a record 11.6
million barrels per day and will cross the 12 million threshold
next year," said Stephen Innes, head of trading for Asia-Pacific
at futures brokerage Oanda in Singapore.
(Additional reporting by Henning Gloystein in SINGAPORE; Editing
by Adrian Croft)
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