Saudi Arabia expressed the need for oil producers to cut 1 million barrels a day from last month’s levels and announced fewer shipments from next month, as OPEC and its allies began laying the groundwork to reduce oil supply next year, reversing an almost year-long expansion.
Saudi Arabia is to export 500,000 fewer barrels a day next month than this month, taking the lead in the so-called “Vienna Group” — OPEC, Russia and some others — to counter the price rout battering the finances of group members and energy companies alike.
While a meeting with other producers on Sunday yielded no change in supply policy, the group said in a statement that it might need “new strategies,” raising the prospect of a wider and coordinated cut next year.
Photo: AP
“We are going to do everything we can to keep inventories and supply demand fundamentals within a reasonably narrow band around balance, and we believe markets will calm down,” Saudi Arabian Minister of Energy and Industry Khalid Al-Falih said yesterday in a speech at an industry event in Abu Dhabi. “We are not in the business of pinpointing a price going forward.”
Oil collapsed into a bear market in little more than a month, and pressure is mounting on the group to act sooner than their policy meeting next month.
The producers need prices that are high enough to balance their budgets and low enough to stimulate demand, and shield themselves from attacks from the White House, all while they contend with wild swings in supply as sanctions hit OPEC member Iran.
Although there are signs of a glut emerging in the US, Al-Falih said on Sunday that it was too early to talk about coordinated production cuts within the group.
Counterparts from Russia and the United Arab Emirates echoed that sentiment.
Oman, a smaller member of the group, had said earlier it would support a cut by consensus of 1 million barrels a day.
The group’s caution arises partly from the unpredictability of Iranian supply.
The US at first insisted it would seek to curtail all of the country’s exports, only to grant waivers to eight of its customers just as Washington reimposed sanctions this month. That confounded a market that was anticipating a stricter enforcement.
The committee that oversees the 2016 agreement to manage supply met Sunday in Abu Dhabi.
“The committee reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements,” it said in a statement.
Weaker global economic growth “could lead to widening the gap between supply and demand.”
Brent crude, the global benchmark, yesterday rose 1.2 percent to US$70.99 a barrel. Futures were still down about 18 percent from a 2014 high reached early last month.
West Texas Intermediate, the US marker, climbed 0.9 percent to US$60.75, paring its losses after falling into a bear market last week.
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