Oil rose by more than 1 percent on Monday, set for its largest one-day increase in a month after Saudi Arabia said Organization of Petroleum Exporting Countries, OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day.
Saudi Energy Minister, Khalid al-Falih said that OPEC and its partners had agreed with technical analysis which showed a need to cut oil supply next year by around 1 million bpd from October levels to avoid an unwelcome build-up of unused crude.
“The balances for 2019 do show, especially in the first half of the year, that there will be significant global oversupply, OPEC and the IEA are releasing their updates to the oil market this week and the outlook for 2019 was already on the weak side. I think those reports are going to be even weaker because they will have to adjust for the increase in U.S. production,” Petromatrix analyst Olivier Jakob said.
The oil price has fallen by around 20 percent in the last month, driven lower by a rapid increase in global supply and the threat of a slowdown in demand, especially from those customers, such as India, Indonesia and China, whose currencies have weakened against the dollar and eroded their purchasing power.
Production from Saudi Arabia, Russia and the United States alone 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 total global daily supply.