Less than two months after Khalid al-Falih’s assurances that Saudi Arabia will produce and export enough oil to keep prices steady, the Kingdom’s Energy Minister has said that exports would be cut by as much as 500,000 bpd this month and next on a bid to prop up prices. At the same time, the Associated Press reports, discussions have started with Russia to curb the global supply of crude seeing as Iran sanctions failed to lift prices.
Al-Falih’s Russian counterpart, Alexander Novak, said Moscow wouldn’t mind cutting production as long as the move had the support of OPEC as a whole.
The swift change in rhetoric follows signs of weaker demand and growing supply, the classic combination that served a blow to bullish traders, with benchmarks slipping into a bear market inside a month. Yet following Al-Khalid’s announcement of export cuts, Brent crude added more than 1 percentage point from Friday’s close, as per a Reuters report that also noted that Saudi Arabia resorted to the move because of uncertainty that it would receive OPEC’s backing for a concerted supply cut effort.
Yet there is only so much Saudi Arabia and/or Russia can do alone or together: U.S. production was among the chief reasons for the latest oil price slump, with production hitting 11.6 million bpd in the week to November 2, up by 400,000 bpd from a week earlier and almost 2 million bpd from a year earlier, according to the latest weekly petroleum status report by the Energy Information Administration.
“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,” Oanda’s head of trading for the Asia Pacific, Stephen Innes, told Reuters.
By Irina Slav for Oilprice.com
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