Trump Blasts Saudi Arabia for Plan to Cut Oil Production

Oil producing countries should cut output by one million barrels per day to re-balance the market, Saudi Arabia's energy minister said Monday, following a drop in crude prices.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).

Khalid al-Falih's comments follow a meeting in Abu Dhabi at the weekend, where the Organisation of Petroleum Exporting Countries (OPEC) and its allies started laying the groundwork to cut supply in 2019, reversing an nearly year-long expansion. "We are not in the business of pinpointing a price going forward".

The energy minister of the United Arab Emirates, Suhail al-Mazrouei, now the president of OPEC, said "changes" likely would be necessary as the oil cartel meets in December in Vienna. "Oil prices should be much lower based on supply!"

Through large production cuts starting at the beginning of 2017, they managed to push up oil prices from below Dollars 30 a barrel to over USD 85 a barrel in October, strongly improving their revenues.

"Supply and demand is perhaps the easy part because you can measure it", al-Rumhy said. However, the USA has granted waivers to certain major importers of Iranian crude, diminishing the expected cuts. But even just signalling that producers could cut production by 1% can make a huge difference in energy markets and beyond.

The comments from the minister, Khalid al-Falih, show the balancing act the USA allies face in dealing with President Donald Trump's actions related to the oil industry.

For consumers, the 20 per cent oil price fall since early October was a relief.

Front-month Brent crude futures, a benchmark for global oil prices, were at $71.59 per barrel at 0644 GMT, up by 2 per cent from their last close.

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The crisis-hit currency reached an all-time high of 74 earlier last month. "The language from Russian Federation suggests it is not ready to follow the Saudis yet". The market should be balanced by the middle of next year, though there are forecasts for a surplus of 1 million to 1.4 million barrels a day, he said.

He said market sentiment had shifted from fears of shortages to worries about oversupply.

Saudi Arabia may also struggle to convince other producers to follow its lead.

"A new strategy needs to be formed... whether it is a cut in production or something else, but it will not be an increase in production", he said.

In his speech at the start of the meeting, Falih said the recent sharp drop in prices had "surprised us".

The Indian rupee was trading at 72.89 against the USA dollar as of just after 15.00 GMT, climbing up from the 72.50 seen on Friday, according to data from Bloomberg. "We're seeing some signs of this coming out of the U.S. We have not seen the signs globally, nor can we predict that they will persist into 2019".

"We need a consensus", he said, indicating that non-OPEC Russia would need to approve any decision.

The sources said any such deal would depend on factors including the level of Iranian exports after the United States imposed sanctions on Tehran but granted Iran's top oil buyers waivers to continue buying oil.

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