Oil prices collapse as OPEC sees production outpacing demand

Saudis scramble to stop oil price slide

The surge in onshore output has helped overall U.S. crude production hit a record 11.6 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

More recently, and in response to the sanctions, Saudi Energy Minister Khalid al-Falih announced on Monday, a major cut in oil production in a bid to rebalance global markets and to boost oil prices that have fallen by around 20% over the last month as global supply has increased.

Oil prices were hit on Monday after U.S. Just weeks ago, some trading firms were talking of $100 oil.

Also, the former President, International Association of Energy Economist ( IAEA), Prof Adeola Akinnisibu, said many barrels of Iranian crude would still get to the market, as long as the USA allows some countries to buy the product.

Depending on the final baseline for the production cuts, the reduction could be in the range of 1 million to 1.5 million barrels a day, one of the delegates said.

Tuesday's drop, which saw both Brent and WTI fall by about 7%, was driven largely by a tweet from US President Donald Trump urging Saudi Arabia not to cut production.

If anything, they are driving prices higher as the United States defends many of their members for very little $'s. Every dollar per barrel change in crude oil prices impacts the import bill by Rs 823 crore ($0.13 billion).

"This tweet certainly did not help prices", ING commodities strategist Warren Patterson said. This is despite the fact that Saudi Arabia cut 500K barrels for December and signalled that it looks like OPEC is going to cut production.

A new round of OPEC-led supply cuts in 2019 would further support USA shale oil production, potentially repeating the cycle that played out in 2014.

For instance, price of Brent crude recorded a four-year high in late September, this year, as it closed at $86.74 per barrel, a development that was greeted with excitements, globally. Alternatively, Russia may propose not to increase output further, instead of a cut, the source said.

Nigeria and Libya, which are exempt from the current supply limiting accord, could be included in a new agreement, two of the sources familiar with the matter said.

The talks are preliminary, however, and the size of the final production cut will largely depend on the starting point the Organization of Petroleum Exporting Countries and its partners use, said one of the people, asking not to be identified because the discussions are private.

With widespread expectations of excessive global oil supply, the United States benchmark has found its way to the lowest price of the year so far.

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