Oil prices climbed on Monday as the world’s biggest supplier Saudi Arabia announced plans to cut production, in the face of fears of oversupply. Saudi Arabia’s energy minister said Monday that oil-producing nations should cut output by one million barrels per day to re-balance the market.
Khalid al-Falih’s comments follow a meeting in Abu Dhabi at the weekend, where the OPEC group and its allies had already started laying the groundwork to cut supply in 2019, reversing an almost year-long expansion.
Saudi Arabia had said the kingdom would cut its production by 500,000 barrels per day.
Oil prices advanced steadily through Monday, with both Brent Crude and West Texas Intermediate (WTI) seeing gains of more than a dollar per barrel.
“In the short term this is a positive for oil, but we must question the impact longer term unless it’s the sign of more to come from OPEC,” said Neil Wilson, chief market analyst at Markets.com.
“Saudi Arabia cannot act alone though — realistically it needs to pull together OPEC allies, and critically Russia, to curb production if it wants prices to hold. The language from Russia suggests it is not ready to follow the Saudis yet.”
Last week, higher US energy stockpiles drove WTI crude to its longest losing streak in more than 30 years, while Brent Crude dropped below $70 a barrel for the first time since April.