LONDON: Oil prices rose on Monday after Saudi Arabia said reduced global demand could lead to a cut in output of a million barrels per day.
Brent crude oil stood at $71.10 per barrel by 4 p.m. in London on Monday, an increase of 1.4 percent.
OPEC and its partners saw a need to cut oil supply by as much as 1 million barrels per day compared to October levels to avoid a build-up of unused oil, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday.
The day before, he said Saudi Arabia alone would reduce its oil shipments by half a million barrels a day in December compared to November, because of seasonal lower demand.
Al-Falih’s made his comments he met fellow OPEC and non-OPEC partners in the UAE capital to discuss the outlook for the market.
The potential cuts come amid reduced global demand and a consequent fall in the price of oil by about 20 percent over the last month, according to Reuters. The currencies of major buyers such as India and China have weakened against the dollar, which has reduced their purchasing power.
Crude oil prices hit four-year highs in late September, with production ramped up in anticipation of the impact of renewed US sanctions on Iran.
Prices then fell again when the US issued sanctions waivers to major importers of Iranian oil. US oil production also started to increase, placing further pressure on prices.
“Just like positive demand surprises underpinned the oil price rally, intensifying downside risks to global growth are now on the rise, and will weigh on both market fundamentals and sentiment,” said Konstantinos Venetis, senior economist at TS Lombard.
Jameel Ahmad, global head of currency strategy and market research at broker FXTM, said the looming threat of an economic slowdown could destabilize the oil markets.
“A reduction in supply next year would be appropriate with the risks of lower economic growth,” he said.