Opec's supply cut bid pumps up oil price

Roman Schwartz
November 14, 2018

The 15 members of the Organisation of Petroleum Exporting Countries, which include Saudi Arabia, alone pump over a third of global crude supply.

But the USA president - facing pressure after Republican losses in the midterm elections - is eager to tamp down threats to the economy, including higher gas prices.

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.

Even with the slump, however, oil prices are still higher than they were a year ago.

The two countries have also clashed over the October killing of US -based journalist Jamal Khashoggi at the Saudi consulate in Istanbul, with the Trump administration reportedly considering sanctions on some Saudi officials in response. Output, however, rose by 127,000 bpd to 32.9 million bpd, OPEC said.

Brent futures for January settlement fell 70 cents to US$69.42 a barrel on the London-based ICE Futures Europe exchange. The uptick in supply and the United States granting of waivers to eight countries to keep importing Iranian oil despite USA sanctions re-imposition this month have contributed to the oil price fall.

In his speech at the start of the meeting, Falih said the recent sharp drop in prices had "surprised us". However, that's not likely this time.

Another factor that softened the crude market was the rampant rise in shale output.

Oil rigs at work at dusk.

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CaptureU.S. oil rig count, data by YCharts. This move comes after the Organisation of Petroleum Exporting Countries' (OPEC) co-founding nation and Russian Federation had previously agreed to increase the crude output.

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. That hasn't helped oil majors Exxon Mobil (XOM) and Chevron (CVX)-they're down 0.5% and 0.9% respectively-while the SPDR S&P Oil & Gas Exploration & Production (XOP) and Energy Select Sector SPDR (XLE), the biggest oil-related exchange-traded funds, are off 1.6% and 1.1%, respectively. The administration had been counting on Saudi Arabia to ensure oil supply to prevent a run-up in prices.

OilA pumpjack sits on the outskirts of town in the Permian Basin oil field in the oil town of Midland, Texas, Jan. 21, 2016. Saudi Arabia has expressed concerns that USA sanctions have removed less oil from the market than expected. In the short term, that might be an option, but it's clearly unsustainable in the long term.

He also made it a point to mention that they were not in the business of predicting future oil prices.

The profitability of USA oil producers over the next few years will depend in large part on what OPEC and its allies do.

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

The market will keep a close watch on the following US oil inventories.

Oil producers will continue to evaluate the market data prior to the Vienna summit, "but if we need to trim production by one million bpd, we will do", he added. That should drive solid revenue and earnings growth over the next few years for Plains All American and other pipeline operators.

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