Oil industry leaders say production cuts may be necessary

Randal Sanchez
November 14, 2018

"One thing that is abundantly clear, OPEC is in for a shale shocker as USA crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year", Oanda's head of trading for the Asia Pacific, Stephen Innes, told Reuters.

Trump posted the message hours after Saudi Arabia's energy minister said that OPEC and its allies should reverse about half the increase in oil output they made earlier this year.

"The technical analysis we reviewed yesterday shows that we need a reduction approaching one million bpd to balance the market", he told an energy conference in Abu Dhabi.

Quevedo was speaking in Abu Dhabi where an oil market monitoring committee was held on Sunday, attended by top exporters Saudi Arabia and Russian Federation.

McNally said it was important for Saudi Arabia to signal to the markets that a production cut was coming as traders anxious about a build up in excess supplies.

The odds are "fairly high" that OPEC and its allies will announce next month a production cut of about 1 million barrels per day, according to Helima Croft, global head of commodity strategy at RBC Capital.

"We want to enter 2019 with a minimum amount of stocks", Falih said.

Global oil supply has increased by 3.3% in 2018, while non-OPEC supply is growing faster and USA oil production is up in the double digits.

Although there are signs of a glut emerging in the United States, the Saudi minister said on Sunday it was too early to talk about coordinated production cuts within Opec+.

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That's no longer true for some members after oil collapsed into a bear market in NY last week, suffering its longest series of daily declines on record.

The energy minister of the United Arab Emirates, Suhail al-Mazrouei, now the president of OPEC, said "changes" likely would be necessary as the oil cartel meets in December in Vienna.

"Equities and oil were pretty much falling in lock-step", said Josh Graves, senior market strategist at RJO Futures in Chicago.

Oil futures in NY fell 0.4 percent Monday, extending a record 11th day of declines, to end the session at $59.93 a barrel.

Brent crude oil traded below $70 last Friday, fuelling consumer hopes of a cheaper retail price of petrol and diesel after months of rising cost.

Root added that commodity prices that are influenced by cartels such as OPEC, which controls almost a third of global oil production, do not necessarily rise and fall with economic cycles. The 15 members of the Organisation of Petroleum Exporting Countries, which include Saudi Arabia, alone pump over a third of global crude supply.

That means US producers have ramped up output even though many of them have been getting less than $60 per barrel for most of the year, far below the global market price of oil.

Crude oil futures for December, which rose to $61.28 earlier in the session, settled lower by $0.26, or 0.4%, at $59.93 a barrel, the lowest settlement since February 2018.

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