Oil rises as Saudi Arabia seeks to tackle oversupply

Oil rises as Saudi Arabia seeks to tackle oversupply

The announcement came after crude prices declined by around 20 percent over a month, as supply has surged, especially by the top-three producers USA, Russia and Saudi Arabia.

"The technical analysis we reviewed yesterday shows that we need a reduction approaching one million bpd to balance the market", Khalid al-Falih told an energy conference in Abu Dhabi.

Saudi Arabia will reduce oil supply next month in response to lower demand, and more cuts could follow next year.

But the United States president undercut that headline quickly, sending crude prices plunging with a Tweet, expressing the hope that Saudi Arabia will not cut output.

However, at the global level, it will be a new blow to consumers, who will have to pay more for gasoline, and will increase transport expenses of the companies. Prices for both WTI and Brent crude - the USA and global benchmarks, respectively - have plunged about 20% since early October.

Producers implemented large cuts starting at the beginning of 2017 but they eased output cuts as of June this year.

Worldwide benchmark Brent crude oil futures were at $69.47 a barrel, down 65c, or 0.9%, from their last close.

Prices have since tanked, entering bear-market territory, helping prompt OPEC to consider production cuts. Saudi Arabia has expressed concerns that USA sanctions have removed less oil from the market than expected. USA shale output is also on a tear and will help total American production grow by at least 1.3 million barrels by 2025, according to the Energy Information Administration. "Sanctions didn't cut so much out of the market as anticipated", he added. The U.S.at first insisted it would seek to curtail all of the country's exports, only to grant waivers to eight of its customers just as Washington reimposed sanctions this month.

This appeared to an abrupt turnabout from OPEC's September meeting, when some of the world's leading oil producers were talking about pumping extra oil onto the market in order to help soothe intensifying supply shock fears.

"Saudi Arabia can not act alone though - realistically it needs to pull together OPEC allies, and critically Russian Federation, to curb production if it wants prices to hold", he added.

"If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further", the bank said in a note. Oman's Oil Minister Mohammed Al-Rumhy said "there is a consensus that there is an oversupply and we need to do something".

Mizuho's Yawger noted that the potential pullback in Saudi output has in part already been made up by the sharp bump in USA production, which reached 11.6 million bpd in the most recent week, a new record.

Commerzbank, Germany's second-largest lender, said on Friday that oil producers must act to prevent prices tumbling.

The bank added that it expected U.S. crude production, already at a record 11.6-million barrels a day, to break through 12-million barrels a day in 2019, making the United States "energy independent".

"A new strategy needs to be formed. whether it is a cut in production or something else, but it will not be an increase in production", he said.

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