Oil gains amid push by Saudi Arabia for further supply cuts

Oil Rebounds as Iraq Signals Deeper Cuts Ahead of OPEC+ Meeting

OPEC may increase oil production cuts to 1.6 million bpd, Iraq says

In point of fact, an announcement of output cut was widely expected following this year's December OPEC+ meet ahead of an Aramco IPO, fate of which would largely depend on crude oil futures' price, while analysts said that the Saudi oil giant would require USA crude oil futures' price to stay above $60 per barrel in order pay its promised dividend of $75 billion by October next year, which seemed to have highly unlikely amid a robust United States inventory build, unless the OPEC+ could install further output curbs to rebalance the global crude oil market.

Beyond that though, the Iraqi oil minister has suggested that perhaps OPEC may even extend production cuts by another 400,000 barrels. "There is a big stock build in the first half of the year - we need to keep an eye on that".

West Texas Intermediate for January delivery advanced 40 cents to $56.36 a barrel on the New York Mercantile Exchange as of 9:05 a.m. London time.

Goldman Sachs said on Monday that OPEC + output restriction is likely to extend through June, but was expecting a "current" three-month extension to provide little support for prices.

"Any sign of discontent between the producers will send out negative signals and will put significant downward pressure on the oil price", said Tamas Varga of oil broker PVM.

The IPO will be priced on 5 December, the same day Opec meets in Vienna.

"We believe that only the final scenario would be constructive for oil prices, as it is the only scenario which would deal with the surplus over 1Q20", ING's strategists said.

Concerns about the inability of the United States and China, the world's two biggest oil users, to reach a preliminary deal to resolve their 17-month trade dispute also weighed on oil prices, along with discouraging US economic data. The contract rose 1.4 per cent on Monday.

Oil eased off session highs earlier in the day as Wall Street dropped after data showed U.S. factory activity contracted in November and after U.S. President Donald Trump unexpectedly announced plans to reimpose tariffs on steel and aluminum from Argentina and Brazil.

It is not certain OPEC+ will agree this week to deepen its curbs. On the other hand, OPEC's largest producer and de facto leader Saudi Arabia is said to be ready to tell fellow producers in the OPEC+ pact that the Kingdom would no longer tolerate and compensate for cheating on assigned production quotas. Some in the group are wary measures to support prices will encourage more US production.

"A deeper cut could boost prices, which would bring on more shale output and not help", the OPEC source said.

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