Oil's Bear Market Pushes OPEC+ Closer to Cuts

Oil's Bear Market Pushes OPEC+ Closer to Cuts

Saudi Arabia plans to reduce oil supply to world markets by 0.5 million barrels per day (bpd) in December, its energy minister had said on Sunday, as the OPEC power faces uncertain prospects in getting other producers to agree to a coordinated output cut.

"We have to study all the factors", Falih said.

With oil wallowing in a bear market, OPEC and its allies gathered in Abu Dhabi on Sunday to weigh production cuts.

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", Falih added.

An official from Kuwait, also an OPEC member, on Monday said that major oil exporters over the weekend had "discussed a proposal for some kind of cut in (crude) supply next year", although the official did not provide any detail.

"Oil-importing emerging economies' currencies would likely react negatively to a cut in OPEC output given Iranian oil exports are already likely to wane over time under the impact of USA sanctions", said Mansoor Mohi-uddin, the Singapore-based head of foreign-exchange strategy at NatWest Markets.

"A new strategy needs to be formed... whether it is a cut in production or something else, but it will not be an increase in production", he said.

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Several analysts said oil prices were likely to turn bullish again.

"This relief gives Iraq time to start taking steps towards energy independence", a video published on the US Embassy in Iraq's official Facebook page said.

Decision comes amid fears of oversupply.

"Prices have been falling amid a continued rise in crude supplies from big producers, such as Saudi Arabia, Russia and the USA, more than compensating for lost Iranian barrels", Forex.com analyst Fawad Razaqzada told AFP before the meeting. They worry that a continued fall in crude oil price will cause a 2014-16 style oil crash when oil price dropped 70%, in large part due to the U.S. shale oil boom. Counterparts from Russian Federation and the United Arab Emirates echoed that sentiment. The producers need prices that are high enough to balance their budgets and low enough to stimulate demand and shield themselves from attacks from the White House, all while they contend with wild swings in supply as sanctions hit OPEC member Iran. The market should be balanced by the middle of next year, though there are forecasts for a surplus of 1 million to 1.4 million barrels a day, he said.

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

"If they fail to signal any intention to reverse the latest increase in production, oil prices threaten to slide further", the bank said in a note.

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