LONDON (Reuters) – Oil prices rose on Monday after Saudi Arabia said OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day next year.
Saudi Arabia, the world’s largest oil exporter, said on Sunday it would cut its shipments by half a million barrels per day in December due to seasonal lower demand.
Brent crude futures LCOc1 were up 52 cents at $70.70 a barrel by 1445 GMT, while U.S. crude futures rose 36 cents to $60.55.
Saudi Energy Minister Khalid al-Falih said on Monday OPEC and its allies agree that technical analysis shows a need to cut oil supply next year by around 1 million bpd from October levels.
“The balances for 2019 do show, especially in the first half of the year, that there will be significant global oversupply,” Petromatrix analyst Olivier Jakob said.
The Organization of the Petroleum Exporting Countries and the International Energy Agency release their respective monthly reports on the outlook for oil supply and demand later this week.
The oil price has fallen around 20 percent in the last month, hit by an increase in global supply and the threat of a slowdown in demand, especially from customers whose currencies have weakened against the dollar and eroded their purchasing power.
“While the oil price has opened on a solid footing today, the knee-jerk reaction to the meeting is likely to subside in the short term until investors take solace in visible signs of a reduction in supply and OPEC lives up to the rhetoric of further supply cuts,” said Aneeka Gupta, associate director at exchange-traded fund provider WisdomTree.
Production from Saudi Arabia, Russia and the United States has risen by 1.05 million bpd in the last three months, based on official output figures.
This has left OPEC scrambling to adjust its own output, which, at around 33.3 million bpd, accounts for roughly a third of global supply.
An official from group member Kuwait said on Monday major oil exporters had over the weekend “discussed a proposal for some kind of cut in (crude) supply next year”, although the official did not provide any detail.
One of OPEC’s biggest problems is the surge in U.S. output.
“One thing that is abundantly clear, OPEC is in for a shale shocker as U.S. crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.