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.
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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.”
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By GlobalData“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.
