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OPEC and its allies will meet in Vienna on December 6 and 7 to decide on the production policy for 2019. Photo: Reuters
Moscow / London / Abu Dhabi / Dubai: Saudi Arabia has announced that it will reduce its oil exports by half a million barrels a day in December, the first tangible sign that OPEC is starting to cut back on its oil production. facing an oversupplied market in 2019.
Saudi Arabia has increased oil production in November, but will reduce deliveries for next month, energy minister Khalid Al-Falih told reporters in Abu Dhabi. The Organization of Petroleum Exporting Countries (OPEC) and other suppliers are seeing signs of an emerging surplus in the United States, although it is too early to talk about a reduction in production, he said before a meeting to evaluate compliance with the announced production reductions.
If Opec and its partners go ahead and extend the cuts in 2019, Saudi Arabia will have to convince not only members of the group, such as Iraq, who are trying to stimulate production, but also and especially Russia, its ally since 2016, which has so far not done much. enthusiasm to cut the exit.
"I think it's all happening in Russia," said Helima Croft, Chief Strategist for Commodities at RBC Capital Market LLC. "They seem to sit on the fence to remove the barrels."
OPEC and associated country suppliers are increasingly eager to consider further cuts after oil prices drop. Crude oil on both sides of the Atlantic fell sharply on Friday as the US announced an increase in stocks and Washington granted exemptions that lessen the impact of sanctions on Iranian exports. Brent plunged below $ 70 a barrel for the first time in six months, losing 4% last week. Futures on West Texas Intermediate also fell by about 5%.
Saudi "appointments"
"The nominations for the month of December are 500,000 barrels a day less than the month of November," said Al-Falih, referring to the amount of crude oil demanded by its refining customers in a given month – in industry jargon, "appointments" – to decide on production. While Riyadh is making cuts and some other OPEC countries are talking about an oversupplied market, the group is setting the stage to reverse the six-month uptrend in production when it meets in Vienna in early December.
The Saudis seem to strike the right balance: on the one hand, do not panic and the market is not as overcrowded as some bearish investors claim, and on the other, it begins to cut production unilaterally . The kingdom may be wary of the anger of US President Donald Trump, who has accused Opec of not doing enough to curb oil prices. By stating that there are fewer appointments, Riyadh actually says that this is not a reduction in production, but rather a lower demand for Saudi oil.
"Ideally, we do not like to cut," said Al-Falih. "We will only cut if we see a persistent overabundance of supply, quite frankly. We see signs of this exit from the United States. We have not seen the signs globally, and we can not predict that they will persist until 2019. "
Russian Energy Minister Alexander Novak said it was "hard to say" whether oil markets would be oversupplied next year. "We have to wait a bit to see how the market will develop," he told reporters in Abu Dhabi, capital of the United Arab Emirates. Russia currently pumps between 10,000 and 20,000 barrels a day less than October levels, Novak said.
A number of global producers agree that they should pump less oil in 2019, and a reduction of one million barrels a day would be a good figure, the oil minister said on Sunday. Oman, Mohammed Al-Rumhy. Producers are considering a series of cuts, including a drop in production of up to 1 million barrels a day, according to delegates.
The International Energy Agency has repeatedly called on Opec to open faucets to ensure that global demand for crude oil is met. IEA executive director Fatih Birol said the market was entering a "red zone" if Venezuela's production losses and Iran's exports were not offset.
"We believe that we have the capacity to produce as a group what is required of us," said UAE Minister of Energy Suhail Al Mazrouei on Sunday.
The group of producers and its allies have rapidly increased production since May, responding to Trump's pressure and offsetting the supply losses of Iran and Venezuela. Now, they are considering a U-turn.
Sudden inversion
The explosion of American shale production complicates the task of OPEC and its allies. US production rose last week to a record 11.6 million barrels a day, and inventories rose 5.8 million barrels, according to the Energy Information Administration. In October, Opec's production reached its highest level since 2016, while Russia pumped 11.4 million barrels a day, a post-Soviet record.
Khalid Al-Ansary and Anthony DiPaola of Bloomberg contributed to this story.
This story was published from a news agency thread without text modification. Only the title has been changed.
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