Oil prices climb after Saudi Arabia announces production cut

Iranian Revolutionary Guard speedboat moves in the Persian Gulf while an oil tanker is seen in the background

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"The Kingdom's crude exports for December will be 500,000 bpd lower than November", Saudi Energy Minister Khalid Al-Falih told reporters at the meeting in Abu Dhabi.

Opec secretary-general Mohammed Barkindo said at the meeting that conformity on the earlier output increases, which had been in place since May, was at 104 per cent for the month of October.

The imposition of sanctions against Iran and those who do business with Iran has had a very limited impact on oil prices, due in large part to strong output from the US and Russian Federation.

"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the U.S., more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP.

A big concern for Saudi Arabia and other traditional producers from the Middle East-dominated Organisation of the Petroleum Exporting Countries (OPEC) is the surge in USA output.

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.

"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.

Suheil al-Mazrouei, energy minister of the host country UAE, hinted that producers are preparing to cut output.

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The latest price slump comes after the United States boosted production of shale oil, while Saudi Arabia, Russia and others raised supplies of crude amid signs of slowing demand.

Brent crude dropped below $70 a barrel on Friday for the first time since April but it was trading above $71 a barrel on Monday.

West Texas Intermediate for December delivery rose as much as 97 cents to US$61.16 a barrel on the New York Mercantile Exchange and traded at US$60.99 at 4:41 p.m.in Tokyo.

In equities, Asian markets were largely flat on Monday following lacklustre USA trading at the end of last week and nervousness over Chinese growth.

But producers ended up cutting more - partly due to unexpected outages in Venezuela, Libya and Angola - and so agreed in June to limit cuts to the agreed level, meaning restoring about 1 million bpd in output. "The committee reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements", it said in a statement.

That in mind, they vowed to consider "options on new 2019 production adjustments, which may require new strategies to balance the market".

Falih on Monday said there had been a marked buildup in inventories, adding that "the 25 producers will not allow this to continue" and that there were "signals" they would do "whatever it takes to balance the market".

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