Published: Wed, November 14, 2018
Money | By Ralph Mccoy

Oil prices rise by more than 1% after Saudi announcement

Oil prices rise by more than 1% after Saudi announcement

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.

OPEC's second-biggest producer Iraq has also indicated it may join in such a move.

Global oil prices tumbled into a bear market last week, down more than 20% from their recent peak. Saudi Arabia is the de facto leader of the group.

The move is likely created to stop the slide in crude prices which had recently fallen over 20% from early October, leaving them in a technical bear market.

That lifted Brent crude, the global benchmark, to $70.70 per barrel yesterday.

"With Iranian waivers coming in higher than anyone expected, Saudi Arabia is acting responsibly by reducing its production that it had earlier brought online to offset possible Iranian losses", said Amrita Sen, chief oil analyst at Energy Aspects Ltd, a consultant in London.

Suheil al-Mazrouei, energy minister of the host country UAE, hinted that producers are preparing to cut output.

The fall also came as the USA -dollar hovered near 16-month highs on Tuesday, making oil imports more expensive for any country using other currencies at home.

"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the U.S., more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP before the meeting.

Trump risks testing Saudi patience - or even provoking the kingdom's ire - at a particularly vulnerable moment, with the USA decision to reimpose sanctions on Iran threatening to increase prices.

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Output from the world's top oil producers Russian Federation, the United States and Saudi Arabia has risen by 1.05 million bpd in the last three months, based on official output figures. 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.

Due to a glut two years ago that saw crude oil prices plunge to under US$30 a barrel from US$100, the major oil producers started cutting down output.

When asked about the possibility of an output cut, he insisted it was "premature to talk about a specific action".

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

Friday marked the 10th consecutive day crude oil prices fell.

He said market sentiment had shifted from fears of shortages to worries about oversupply.

That led to a sharp price drop on Monday, which continued into Tuesday. The market should be balanced by the middle of next year, though there are forecasts for a surplus of 1 million to 1.4 million barrels a day, he said.

Trump's comment followed remarks from Saudi Arabia's energy minister saying OPEC was considering cutting supply next year, citing softening demand. The producers need prices that are high enough to balance their budgets and low enough to stimulate demand and shield themselves from attacks from the White House, all while they contend with wild swings in supply as sanctions hit OPEC member Iran.

Kristian Rouz - The shale oil boom in North Dakota's Bakken oil field continues to set new records, rendering USA crude prices lower, which, in the face of increasing United States energy exports, is poised to weigh on global oil prices as well.

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