Oil prices are benefiting this morning from the news that Saudi Arabia plans to trim oil exports by 0.5mn barrels per day (bpd) barrels next month, at the OPEC-Non-OPEC Joint Ministerial Monitoring Committee (JMMC) meeting in Abu Dhabi over the weekend. ….
By Aneeka Gupta – WisdomTree
Saudi Energy minister Khalid Al-Falih confirmed that Saudi Arabia will take the lead in OPEC to counter the oil price rout. As signs of a glut are emerging in the U.S., Al-Falih set the tone for a need by OPEC to cut oil production by 1mn (bpd) from October levels.
We believe Saudi Arabia might struggle to convince other producers to follow suit. Russian energy minister Alexander Novak showed no sign he was ready to act immediately.
So far, Russian oil producers aimed to boost production at 300,000bpd. Iraq has successfully boosted production to a record.
More importantly, US crude oil production posted a new record high, outpacing Russia and closer to the levels Saudi Arabia might attain in the next 6 months.
Oil prices have declined into bear market territory in a span of a month raising pressure on the JMMC to act sooner than their policy meeting on 5th December in Vienna.
Iran sanctions did not have the downward effect on oil production as the markets had anticipated as the US unexpectedly provided waivers to eight countries – including South Korea, Japan and India to continue importing crude oil from Iran for the next 180 days.
While the oil price has opened on a solid footing today, the knee jerk reaction to the meeting is likely to subside in the short term until investors take solace in visible signs of a reduction in supply and OPEC lives up to the rhetoric of further supply cuts.