Price of oil on the rise as OPEC members eye cuts in production

Saudi Energy Minister Khalid Al-Falih, right, and his UAE counterpart Suhail Al-Mazrouei both said that oil production changes would likely be necessary. (AFP)
Updated 13 November 2018

Price of oil on the rise as OPEC members eye cuts in production

  • Production cuts of up to 1 million barrels a day may be necessary
  • Suhail Al-Mazrouei, currently the president of OPEC, similarly said ‘changes’ would likely be necessary

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. 

Oil prices surge after attacks hit Saudi output

Updated 9 min 6 sec ago

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.