OPEC and its allies have expressed serious concerns about global oversupply, prompting Saudi Arabia to announce a supply cut next month. The announcement sent prices over one percent higher during Monday’s Asian trading session. Brent crude futures were up 1.42 percent to $71.16 per barrel, and U.S. WTI Futures were trading up 0.85 percent to $60.70 per barrel as of 1:53 p.m. HK/SIN.
In a statement following its weekend meeting, OPEC and its allies hinted that several OPEC and non-OPEC oil producing countries may have to curb production in order to keep the oil markets balanced. In a separate announcement, Saudi Arabian Energy Minister Khalid al-Falih told reporters that the country will cut its supply by 0.5 million barrels per day. Taking the opposite position, Russian Energy Minister Alexander Novak said that he remains unconvinced that the oil market will remain oversupplied in 2019.
The announcements came only a few days after the Energy Information Administration (EIA) reported that U.S. production hit record highs of 11.6 million barrels per day earlier this month. On Friday, Baker Hughes reported that U.S. energy firms added 12 oil rigs last week, for a total count of 886 rigs, the highest number since March 2015.
This wouldn’t be the first production cut for OPEC in recent years. In January 2017 the group implemented production cuts to curtail a global surplus that caused prices to tank. The last production cut was partially canceled in June after oil prices returned to 3 ½ year highs.
A formal meeting of OPEC will be held next month, when the strategy will be formally unveiled.