Oil Prices Rise by 1% after Saudi Announces Cut in Supply

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Oil prices rose by about one per cent on Monday after top exporter Saudi Arabia announced a cut in supply for December. seen as a measure to halt a market slump that had seen crude decline by 20 per cent since early October.

International benchmark Brent crude oil futures were at $71.11 per barrel at 0051 GMT. up 93 cents. or 1.3 per cent from their last close. US West Texas Intermediate (WTI) crude oil futures were at $60.73 per barrel. up 54 cents. or 0.9 per cent from their last settlement.

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

Khalid al-Falih told reporters that Saudi Aramco`s customer crude oil nominations would fall by 500.000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 per cent.

The announcement came after crude prices declined by around 20 per cent over a month. as supply has surged. especially by the top-three producers USA. Russia and Saudi Arabia. “Saudi Arabia has stepped in front of the oil market bears. proactively announcing they will reduce exports.“ said Stephen Innes. head of trading for Asia Pacific at futures brokerage Oanda in Singapore.

A big concern for Saudi Arabia and other traditional producers from the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) is the surge in US output. US energy firms last week added 12 oil rigs in the week to Nov. 9 looking for new reserves. bringing the total count to 886. the highest level since March 2015. Baker Hughes energy services firm said on Friday.

The rig count is an indicator that U.S. crude production. already at a record 11.6 million barrels per day (bpd). will increase further. “One thing that is abundantly clear. OPEC is in for a shale shocker as US crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year.“ Innes said.