Oil prices stabilised after Saudi Aramco said it plans to make “the deepest customer allocation cuts in its history” in oil supplies in November to help reduce global inventories and balance the market.
Brent crude, the global benchmark, erased earlier declines to trade marginally higher at $55.62 a barrel in London trade after the news of the Saudi oil allocations cuts.
US West Texas Intermediate crude futures were trading at $49.53, up 24c. WTI’s losses last week came to 4.6%.
State-run Saudi Arabian Oil Co, known as Aramco, will make an “unprecedented” cut of 560,000 barrels a day in its allocations to customers next month, the Saudi energy ministry said in a statement.
Aramco plans to supply 7.15m barrels a day “despite very strong demand” that exceeds 7.7m barrels a day, it said.
“Saudi Arabia is once again demonstrating extraordinary leadership in its commitment to rebalancing the market, as we approach the upcoming key meeting of November 30 in Vienna, by restraining not only the top-line of production volume, but even more importantly the bottom line of exports, which are what ultimately shape global inventories and market balances,” said the ministry.
“The kingdom expects all other participants in the effort to follow suit and to maintain the high levels of overall conformity achieved in August going forward.”
Saudi Arabia, the world’s top crude exporter, is leading the Organisation of Petroleum Exporting Countries and other producers including Russia in paring output under a deal that helped propel oil into a bull market in September.
Lower compliance with the curbs promised by some nations combined with rising production in Opec members Libya and Nigeria — both exempt from reducing output due to their internal strife — have added pressure on Saudi Arabia to make deeper cuts of its own.
The decrease in allocations for November “constitutes a full 290,000 barrels a day reduction over and above the 486,000 barrels a day” that Saudi Arabia pledged to cut as part of its commitment to the global output accord, said the ministry.
This adds up “to a massive total of almost 800,000 barrels a day” in cuts.
Saudi Arabia scaled back exports in September to less than 6.7m barrels a day, “despite high customer demand and the partial reduction of domestic summer crude burning requirements”.
Oil prices have had one of the most bearish weeks in months.
Oil production platforms in the Gulf of Mexico started returning to service after Hurricane Nate had forced the shutdown of over 90% of crude output in the area.
The prospective restarts kept price gains in check.
“Oil is having trouble to find direction. Mixed signals keep investors busy changing their minds,” said Hans van Cleef, energy economist at ABN Amro.
“There is a good chance that we will continue to trade a bit sideways in the coming weeks up to the Opec meeting.”
Opec countries are due to meet in Vienna on November 30, when it will discuss its pact to reduce output in order to prop up the market.
Opec secretary-general Mohammad Barkindo said over the weekend that consultations were under way for an extension of the agreement beyond March 2018 and that more oil-producing nations may join the pact, possibly at the November meeting.
Bloomberg and Reuters
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