Oil prices have increased after Saudi Arabia announced a supply cut in December due to seasonal lower demand.
Brent crude futures, the international benchmark, soared 92 cents per barrel to reach $71.1, while US crude futures increased 50 cents to $60.69, Reuters reported.
Saudi Arabia said OPEC and its partners believe that a production reduction of one million barrels per day (Mbbl/d) from October levels is required due to decreasing demand.
Saudi Arabia energy minister Khalid al-Falih stated that based on technical analysis, OPEC and its partners believe the supply cut will avoid a build-up of unused crude.
This comes a day after Khalid al-Falih announced that the country would reduce exports by 0.5Mbbl/d next month.
Petromatrix analyst Olivier Jakob was quoted by the news agency as saying: “The balances for 2019 do show, especially in the first half of the year, that there will be significant global oversupply.”
“OPEC and the IEA are releasing their updates to the oil market this week and the outlook for 2019 was already on the weak side. I think those reports are going to be even weaker because they will have to adjust for the increase in US production.”
Crude prices have dropped by 20% since early October due to rising global supply and concerns related to a potential slowdown in demand.
During the last three months, the world’s three biggest producers, Saudi Arabia, Russia and the US, have raised output by 1.05Mbbl/d.