Oil gains after Saudi paves the way for an output cut

Both Brent Crude and West Texas Intermediate (WTI) saw gains of more than a dollar per barrel.

"Saudi Arabia has stepped in front of the oil market bears, proactively announcing they will reduce exports", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

The Saudis are cutting the number of barrels they produce in December, with this reduction likely to double to a million a day next year, Saudi energy minister Falih al-Khalid said.

In light of these developments, the world's traditional oil leader and unofficial OPEC leader, Saudi Arabia, is seeking to boost oil prices in the near-term to win enough time before its sovereign wealth fund starts generating more substantial returns on its investments.

While a meeting with other producers on Sunday yielded no change in supply policy, OPEC+ warned in a statement that it might need "new strategies", raising the prospect of a wider and coordinated cut in 2019.

The Trump administration has been counting on Saudi Arabia to assure oil supply to prevent a run-up in prices post snapback of Iran sanctions. US crude turned negative and extended losses after the tweet.

The crash deeply impacted oil producers, with Saudi Arabia's fiscal deficit rising to 16% of its GDP - meaning lesser money for infrastructure, defence, and its social projects such as free medicine for citizens and so on.

Saudi Arabia will cut production as well as exports, he said. Novak showed no sign he was ready to act immediately and Vagit Alekperov, the CEO of Russia's second-largest oil producer Lukoil PJSC, said there's no need to cut output now. Oil prices shed a fifth of their value in just one month after surging to a four-year high in early October, driven by a combination of factors centred on higher supply and fears of sluggish demand.

Russian Federation stated on Sunday that it did not believe that the oil market would face a probability of an oversupply next year.

"The request America made to Saudi Arabia and other OPEC countries is to be sure that if there is any loss of supply from Iran, that we will supply that".

The oil producers have chose to act after oil dropped as much as 20 percent in one month, after hitting a four-year high in early October.

Dudley said the waivers had been unexpected, so the market had been readjusting. "The consensus is that we need to do whatever it takes to balance the market". The rupiah's plunge to a 20-year low last month is spurring Southeast Asia's biggest economy to push forward with a plan to reduce pain from a growing dependence on imported crude oil.

Looking ahead, Commodity Analysts at RBC Capital Markets believe the likelihood of an official production cut from OPEC and its key allies at its December meeting is now increasing.

  • Eleanor Harrison