Riyadh cuts oil supplies

Saudi Arabia’s Energy Minister Khalid Al-Falih

In the week ending November 9, the number of active drilling rigs in the United States increased by 14 to 1,081, and the number of rigs operating in USA oil fields increased by 12 to 886.

Energy ministers of top producers Russian Federation and Saudi Arabia will join other OPEC and non-OPEC officials for the meeting of the Joint Ministerial Monitoring Committee (JMMC), which oversees production levels.

A majority of OPEC and allied oil exporters support a cut in the global supply of crude, Oman Oil Minister Mohammed bin Hamad al-Rumhi was cited by Reuters as saying.

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after US sanctions on Iran failed to cut Tehran's output, Saudi Arabia's energy minister said Monday.

UAE energy minister Suhail Al Mazrouei said other factors such as a stronger dollar and the risk of trade wars posed significant threats to the global oil markets as much as an impending supply glut.

"A new strategy needs to be formed... whether it is a cut in production or something else, but it will not be an increase in production", he said.

Sean Evers, managing partner, Gulf Intelligence, said, "The severity of USA sanctions has clearly not turned out to be as robust as had been expected with the U.S. offering waivers to 8 countries, including China and India, Asia's two largest importers".

Oil collapsed into a bear market in little more than a month, and pressure is mounting on the OPEC+ group to act sooner than their policy meeting in December.

Kazakhstan said on Tuesday its oil output rose 4.8 per cent to 74.5 million tonnes in the first 10 months of 2018, equivalent to 1.82 million bpd.

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But the highs and lows of the market need to end for both oil consumers and producers to profit, said al-Rumhy, the Omani official.

When asked about the possibility of an output cut, he insisted it was "premature to talk about a specific action".

"Globally we're looking at a pretty flat picture, but underneath that headline number there is growth in some areas" of upstream investment, said Richard Mallinson, an analyst with consultant Energy Aspects Ltd.in London.

While benchmark Brent crude is trading below $70 a barrel, the West Texas Intermediate dropped below $60 a barrel. But they climbed on Monday as Riyadh announced plans to cut production in response to fears of oversupply. Also, crude stockpiles increased for seven successive weeks. Sooner or later, oil prices will move toward levels more in line with market forces, which could be even lower than current prices.

Specifically, any positive effects of the widespread expectations that Saudi Arabia will drastically cut exports - by over 500,000 barrels per day (bpd), according to media - were said to have been offset by US president Donald Trump tweeting his displeasure over the idea cutbacks and Russia's seeming reticence to curb its own production.

There are signs that renewed U.S. sanctions on Iranian oil exports may have a softer-than-expected impact.

This time, Saudi Arabia is urging allies to focus on the risk of rising oil inventories and forecasts for massive growth in rival supplies next year including US shale.

Rising U.S. output played a big role in popping the recent oil price bubble.

But producers eased output cuts in June after signs of a tighter market and higher prices, selling hundreds of thousands of extra barrels.

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