OPEC considers slashing oil production to boost falling prices

Posted December 07, 2018

"Given the recent ramp-up in supply from these producers, this represents a year-on-year decline in crude output of just 0.2 million barrels per day for 2019", Ann-Louise Hittle, vice president for macro oils at Wood Mackenzie, said in a briefing.

OPEC agreed in principle to cut production during a meeting at its headquarters in Vienna, Austria on Thursday, two sources told Reuters.

Falih made the comments as OPEC members and other oil-producing countries mulled cuts in output on Thursday to prop up plunging prices. Its cooperation with Russian Federation shows how much OPEC has changed since 2016 when the two countries ended their historic animosity and started to manage the market together.

Concern over an emerging supply glut has decimated oil prices - West Texas Intermediate, the USA benchmark, fell more than 2 percent to $51.56 per barrel on Thursday - but President Trump has pushed for cheaper oil, urging other countries to refrain from output cuts.

"Hopefully, OPEC will be keeping oil flows as is, not restricted". The price of both benchmark USA crude and the standard for internationally traded oil fell 22 per cent in November.

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Further speaking about Donald Trump's tweet, Al-Falih said that he has full right to share his views using his favourite medium which is Twitter and we take that seriously.

While the net balance shows the United States is selling more petroleum than buying, American refiners continue to buy millions of barrels each day of overseas crude and fuel.

Negotiations between OPEC members are fraught, however, as some feel that Saudi Arabia wields too much clout in setting policy. Given the economic sanctions being reimposed by the US, Tehran doesn't intend to join any agreement for cutting production, the country's oil minister Bijan Namdar Zanganeh said. The long rally in oil prices lasted until October.

Analysts estimate that if Russian Federation is willing to step up its production cuts, OPEC and non-OPEC countries could trim production by a combined 1.3 million to 1.4 million barrels a day.

According to estimates from the International Energy Agency, Saudi Arabia accounts for more than a third of Opec's total production capacity and more than half of the group's spare capacity. An oil price around $60 suits the needs of producers and consumers and it should remain at that level in January, he said.

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"The big unknown is how President Trump will react to any production cuts", said analysts at ING.

That is not to say the decision by Opec and partners was the only factor.

"Markets.believe the production cut deal will be in range of 1-1.3 million bpd", ANZ bank said on Thursday.

Possibly complicating any Opec decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. Falih also noted that production from some OPEC producers is falling.

But US President Donald Trump threatened on Tuesday to place "major tariffs" on Chinese goods imported into the United States if his administration didn't reach a desirable deal with Beijing.

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