Oil prices have staged a recovery, climbing above $70 a barrel after Saudi Arabia said the world’s major crude producers agreed that supply needed to be cut significantly next year, Guardian informed.
Speaking at a conference in Abu Dhabi, Saudi energy minister Khalid Al Falih said the kingdom’s oil output would fall by 500,000 barrels per day in December, CNN added.
Members of the Organization of Petroleum Exporting Countries (OPEC) and its allies could reduce supply further next year if needed, he added.
That would largely wipe out the 1m bpd increase the group agreed in June to try to rein in the price of oil.
Khalid al-Falih’s comments sparked a recovery in the price of international benchmark Brent crude, which rose to $70.83 a barrel and is on course for its biggest increase in a month.
Crude prices hit four-year highs of more than $80 a barrel in late September and early October over fears of the impact of U.S. sanctions on Iranian oil exports, triggering warnings of prices hitting $100.
But the market has turned bearish in the past three weeks due to the US issuing sanction waivers for eight countries importing Iranian crude, record American production and forecasts of slowing demand.
Falih said the U.S. sanctions had removed less oil from the market than expected because of the waivers. “Sanctions didn’t cut so much out of the market as anticipated,” he added.
“There will need to be a reduction of supply from October levels approaching 1m barrels… The consensus is that we need to do whatever it takes to balance the market,” the energy minister added.
Several analysts said oil prices were likely to turn bullish again. “Oil markets are significantly oversold in our view, and we remain convinced that both Brent and [US benchmark] WTI will rebound from their current bearish market mode,” said analysts at MUFG bank.