How Saudi Arabia is throwing its weight around in oil markets today

Andrew Cummings
November 14, 2018

Despite prospective, massive output cuts to avoid a global glut being the talk of the crude industry, oil prices yet again continued their record slide on Monday, with West Texas Intermediate declining 26 cents to $59.93 per barrel and Brent falling 6 cents to close at $70.12.

Last week, higher U.S. energy stockpiles drove WTI crude to its longest losing streak in more than 30 years, while Brent crude dropped below $70 a barrel for the first time since April.

"I think the consensus among all members is that we need to do whatever it takes to balance the markets and if that means trimming supply by a million bpd, we will do it", Khalid Al Falih told a ministerial panel at Adipec in Abu Dhabi.

Abu Dhabi - Oil prices climbed on Monday as the world's biggest supplier Saudi Arabia announced plans to cut production.

Saudi Arabia will reduce oil supply next month in response to lower demand, and more cuts could follow next year. Since May, Opec production has risen 820,000 barrels a day, and Russia's output increased from 440,000 barrels a day in May to 11.4 million b/d in October.

The Saudi Energy Ministry said on Sunday that Al-Falih appreciated the cooperation of all producers to ensure the "stability of the markets" and that there were "sufficient supplies".

"[Trump]'s Twitter comments and back-channel pressure played a pivotal role in prompting Saudi Arabia and its key OPEC allies to open the taps", she says.

Commerzbank AG, Germany's second-largest lender, said last Friday oil producers must act to prevent a free fall of prices.

"Regardless of what OPEC is doing, the USA is ramping up production as fast as it can", said Welch.

Crude oil futures have spiked in early trade on Monday, following reports that Saudi Arabia will cut production levels in December.

Root added that commodity prices that are influenced by cartels such as OPEC, which controls almost a third of global oil production, do not necessarily rise and fall with economic cycles.

The crash deeply impacted oil producers, with Saudi Arabia's fiscal deficit rising to 16% of its GDP - meaning lesser money for infrastructure, defence, and its social projects such as free medicine for citizens and so on. At the same time, the Associated Press reports, discussions have started with Russian Federation to curb the global supply of crude seeing as Iran sanctions failed to lift prices.

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

But the United States is continuing to pump out high volumes of crude.

Christopher Shiells, a London-based emerging-markets analyst at Informa Global Markets Ltd:"For those emerging markets that run large external imbalances and import oil, it is another reason to be wary especially as higher oil prices are not being driven by strong global growth".

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