Oil prices rose by more than one percent on Monday after top exporter Saudi Arabia announced a December supply cut, a measure likely aimed at halting a market slump that has seen crude decline by 20 percent since early October.
Front-month Brent crude futures, a benchmark for global oil prices, were at $71.37 per barrel at 0531 GMT, up$1.19, or 1.7 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were at$60.87 per barrel, up 68 cents, or 1.1 percent.
Saudi Arabia plans to reduce oil supply to world markets by 0.5 million barrels per day (bpd) in December, its energy minister said on Sunday, as the OPEC power faces uncertain prospects in getting other producers to agree to a coordinated output cut.
Khalid al-Falih told reporters that Saudi Aramco’s customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 percent.
Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC).
Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said OPEC was “focused on mitigating downside risks” after crude prices declined by around 20 percent over a month following a supply surge, particularly from the top three producers the United States, Russia and Saudi Arabia.
“Saudi Arabia has stepped in front of the oil market bears, proactively announcing they will reduce exports,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
A big concern for Saudi Arabia and other traditional producers from the Middle East-dominated OPEC is the surge in U.S. output.
U.S. energy firms last week added 12 oil rigs in the week to Nov. 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday.
The rig count indicates U.S. crude output, already at a record 11.6 million bpd, will increase further.
“One thing that is abundantly clear, OPEC is in for a shale shocker as U.S. crude production increased to a record 11.6 million barrels per day and will cross the 12 million thresholds next year,” Innes said.