Saudi Arabia has expressed the need for oil producers to lower 1 million barrels a day compared to October, and announced fewer shipments from next month because the Organization for Petroleum Export (OPEC) and its allies have begun work to ease oil supplies in 2019, reversal of almost one year of expansion.
Saudi Arabia will export in December 500,000 barrels less per day than this month, taking over the leading role in Opcu to counter the price brand which is affecting the finances of members of groups and energy companies. While the meeting with other producers on Sunday did not bring changes in the supply policy, Opec + warned in a statement that it might need "new strategies", which would increase the prospect of a wider and coordinated cut in 2019.
"We will do everything in our power to maintain stocks and provide the foundations of demand in a reasonably narrow band around balance, and we think the markets will calm down," Saudi energy minister Khalid Al-Falih said in a trade speech in Abu Dhabi on Monday. "We are not in the industry setting prices in the future."
Oil fell to the bear market for just over a month, and pressure is rising in the Opec + group to operate faster than in December. Manufacturers need prices that are high enough to balance their budgets and low enough to stimulate demand and protect against attacks by the White House while they are struggling with wild supply fluctuations because sanctions have struck an Opec member in Iran.
Although there are signs of recovery in the US, Saudi minister Saudi Arabia said on Sunday it was too early to talk about coordinated production cuts at Opec +. His contenders from Russia and the United Arab Emirates respond to him. Oman, a smaller member of the group, said earlier that he would support cutting by a consensus of 1 million barrels a day.
The group's caution stems partly from the unpredictability of Iran's supply. The US initially insisted that it would seek to limit all exports of the country, and only to release eight of its customers, just as Washington again introduced sanctions this month. This hampered the market, which provided for stricter enforcement.
"Iran's departure is higher than expected, Saudi Arabia is acting responsibly, reducing the production it previously brought online to offset Iran's possible losses," said Amrita Sen, Chief Oil Analyst at Energy Aspects Ltd., consultant in London .
The Committee, which overseen the OPEC + contract for delivery management in 2016, met on Sunday in Abu Dhabi. "The Committee reviewed the current bases of supply and demand for oil and pointed out that outlook 2019 indicates a higher supply growth than global requirements," reads the statement. Weaker global economic growth "could lead to an increase in the gap between supply and demand."
"Opecifications have sent a clear signal that they are on the rise in supply, and weak demand may continue to lower oil prices," said Jason Bordoff, director of the Center for Global Energy Policy at Columbia University in New York. "While Saudi Arabia lowers production in December, the group can wait to see how Iranian supplies and other variables play a role before it can agree on joint actions to raise prices."
The price of Brent crude, a global benchmark, rose 1.2 percent to $ 70.99 a barrel at 10:55 Singapore time. The value of futures contracts continued to fall by around 18 percent compared to 2014 reached at the beginning of last month. West Texas Intermediate, an American operator, rose 0.9 percent to $ 60.75, making up for losses after being hit in last week.
While current oil prices are still higher than a year ago, they are far below what Saudi Arabia has to balance its budget. For comparison, Russia is in a more comfortable position, and the Minister of Energy, Aleksander Nowak, did not give a sign that he is ready for immediate action. The market should be balanced by the middle of next year, although forecasts predict a surplus of 1 million to 1.4 million barrels per day, he said.
"I think it all boils down to Russia," said Helima Croft, chief goods strategist at RBC Capital Market Llc. "It seems that they are sitting straight on the fence, pulling the barrels away."
Saudi Arabia may also have difficulty convincing other producers to follow in its footsteps. Iraq has successfully stimulated production to a record, and its more fragile economy may not make it want to reverse the rate.
Al-Falih said the demand for Saudi oil was weaker for the first time since the kingdom began to increase production from May to June. If Riyadh reduces its daily exports by 500,000 barrels next month, it will effectively eliminate most of the increase in production over the last six months. Saudi Arabia will reduce production as well as exports, he said.
"Ideally, we do not like to cut," said Al-Falih. "We will only cut if there is persistent stagnation of supply, quite honestly, we see some signs of this exit from the US We have not seen signs around the world, nor can we predict that they will last in 2019."
Novak of Russia said it was "hard to say" if the oil markets were to be overpaid next year. "We have to wait a bit to see how the market grows," he told reporters. Russia is currently pumping from 10,000 to 20,000 barrels a day below October's level, and the demand from customers is "fairly stable," said Novak.