Opec's supply cut bid pumps up oil price

Saudi Arabia’s Energy Minister Khalid Al-Falih

Oil prices rose about 1 percent on Monday, breaking a stretch of losses, after Saudi Arabia said OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day next year.

Russia's energy minister Alexander Novak said in Abu Dhabi on Sunday it was too early to make a decision to reverse course and cut supply.

Saudi Arabia raised its production from around 9.9 million barrels per day (bpd) in May to around 10.7 million bpd in October, according to Energy Minister Khalid Al-Falih.

Oil prices have since come under downward pressure from rising supplies, despite the new USA sanctions on Iran.

However, at the global level, it will be a new blow to consumers, who will have to pay more for gasoline, and will increase transport expenses of the companies. The U.S. standard, West Texas intermediate crude, was $60.19, down 21 percent in the same period.

Malaysia is an oil producing nation but is not part of the 15-member Opec which controls over 80 per cent of the global oil output and its prices.

Brent crude, the worldwide benchmark for oil, ended last week at $70.18, down 19 percent since October 3.

"In the short term, this is a positive for oil, but we must question the impact over the longer term unless it's the sign of more to come from OPEC", said Markets.com Market Analyst Neil Wilson.

Rapid expansion in North Dakota's oil production is stirring concerns over a possible decline in crude prices globally, and Saudi Arabia has unveiled new measures to support prices just above its breakeven point.

One of OPEC's biggest problems is the surge in US output.

Falih said they would then decide whether to adjust production and by how much.

These swing producers can influence prices by artificially capping oil supply, but doing so is a risky game.

A senior OPEC source said the cartel and other major producers are discussing cutting production by as much as 1.2 million barrels per day.

"But I fully expect there to be coordination to try to keep the oil price within a certain fairway".

Major oil producers said Sunday that crude supply next year would outstrip demand, calling for new strategies based on production adjustments. Turn about: Opec members and its 10 allies are mainly anxious about the increasing U.S. production (11.4 million barrels a day).

"[Trump]'s Twitter comments and back-channel pressure played a pivotal role in prompting Saudi Arabia and its key OPEC allies to open the taps", she says.

But the market has turned bearish in the past three weeks due to the U.S. issuing sanction waivers for eight countries importing Iranian crude, record American production and forecasts of slowing demand.

Despite the sanctions against Iran, the supply of oil is ample as output from the world's top three producers - Russia, the United States and Saudi Arabia - is rising. Russian Federation has given mixed signals about a cut, with Lukoil Chief Executive Vagit Alekperov saying on Monday that he did not see cuts being necessary.

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