New reports indicate that Saudi Arabia has a plan to cut worldwide oil supply by half-million barrels-per-day starting next month. According to Saudi Arabian energy minister, Khalid al-Falih, Saudi Aramcos customer crude oil nominations are likely to decrease by 500,000 bpd in December (when compared to November) because demand this season is much lower. The OPEC power is trying to cope with uncertain prospects at a time when it is important to convince other oil producers to reach an agreement over coordinating a cut to output.
Now, Saudi Arabia has increased its output over the past year by nearly 1 million bpd, mostly out of pressure from US President Donald Trump. Other oil-consuming countries have also placed added pressure on the OPEC giant to help balance the market in order to compensate for lower suppliers out of Iran (also a result of pressure from US sanctions).
It was only a month ago that analysts were predicting crude oil futures would soon reach $100 a barrel, with oil prices at a four-year high! Unfortunately, Iran’s customers had received some remarkably generous waivers that allowed them to continue scooping up barrels of crude at lower prices, thanks to increasing concerns over a surplus. This brought oil prices down to less than $70 a barrel on Friday, a significant drop from the $85 per barrel posted in October.
It is important to note, also, that US West Texas Intermediate (WTI) and Brent crude—which an international benchmark for crude oil—settled at lower prices last week. Unfortunately, the slower market has all but canceled out the year’s gains so far but five straight weeks of decline now marks the oil market’s 10thstraight session of loss. This 10-day loss is the longest losing streak for US crude since the middle of 1984.
That in mind, January WTI crude oil futures finally settled down 4.4 percent, falling $2.78 to $60.36. Similarly, January Brent crude oil settled down 3.78 percent, falling $2.65 to $70.18.
With Brent down to below $70 a barrel (the lowest since April) and West Texas Intermediate sinking to a nine-month low of $60 a barrel, outlook certainly looks grim. Still, US shale production is up even at a time when Saudi Arabia and Russia (among others) are increasing supply.