Oil prices entered a bear market last week, tumbling 21% from recent highs as it became clear that Trump will significantly water down Iran oil export sanctions by granting waivers to its 8 largest clients even as US inventory stockpiles are once again rising amid almost weekly records in US oil production. OPEC and its non-OPEC allies – which is pretty much everyone except US shale producers – are starting to sweat, and during today’s meeting in Abu Dhabi they hinted that an oil output cut to limit excess production may be coming.
Speaking to reporters, Oman’s Oil Minister Mohammed Al-Rumhy said that “a number of global producers agree they should pump less oil in 2019, and a reduction of 1 million barrels a day would be a good number,” according to Bloomberg. Others echoed his sentiment, floating a range of cutbacks, however the most often cited number was a decrease in output by as much as 1 million barrels a day, roughly the amount of Iranian oil production that is expects to continue flowing thanks to the recent sanction waivers.
“I think probably there is support that right now there is too much oil in the market and stock, inventories are building up,” Al-Rumhy told reporters today in the UAE capital.
Oman min says a 1 million cut would be a good start #OOTT #opec
— Amena Bakr (@Amena__Bakr) November 11, 2018
Of course, OPEC can not be seen as responding to every political whim in the White House, especially if it will result in higher gasoline prices and an angry Donald Trump, so a technical committee representing the coalition framed the need for a production cut in the context of its projections according to which the global oil surplus – which hit unprecedented levels in 2015 – will resurface in 2019 if they continue pumping at current rates, according to delegates cited by Bloomberg. Nonetheless, Saudi Arabia’s Energy Minister Khalid Al-Falih – clearly cognizant of the political risks of Riyadh being singled out as the reason for the next oil price spike – said ahead of Sunday’s meeting in Abu Dhabi between OPEC+ member that it was “too premature” to discuss cutting output.
