Oil prices rise by 1% after Saudi announces December supply cut

Oil prices rise by 1% after Saudi announces December supply cut

It's a big reversal.

The drop in prices came after the U.S. said it would allow eight countries, including India, to continue importing crude from Iran.

Cailin Birch, analyst at the Economist Intelligence Unit, said a slowing oil demand is beginning to appear in China, the world's largest importer of crude oil.

Before the United States re-imposed sanctions on Iran, "fear and anxiety gripped the market", al-Falih said at the Abu Dhabi International Petroleum Exhibition & Conference.

At the same time, global oil demand growth forecast was cut by 70,000 barrels a day as concerns continue to swirl over the health of emerging market economies. Saudi Aramco plans to spend more than $300 billion over the next decade to maintain its 12 million barrel-a-day capacity and boost gas output. However, this month, Washington went ahead and granted waivers to 8 of Iran's customers, thereby confounding a market that had been anticipating a very strict enforcement of the sanctions. Analysts believed the exemptions relieved concerns over volatility in global market caused by USA sanctions against Iran. However, he added: "We need not to overreact when these things happen".

Saudi energy minister Khalid Al Falih suggested the kingdom wants to do just that.

"If all things remain equal, and they nearly certainly will not as things will change - it is a dynamic market - then the technical analysis we saw yesterday. tells us that there will need to be a reduction of supply from October levels approaching a million barrels", Falih said. "If that means trimming supplies by a million (bpd), we will". They say they are considering production cuts.

Speculators have pulled back on heavy bets on an oil rally, a process that continued Tuesday, traders said.

Senate Minority Leader Chuck Schumer, a New York Democrat, had previously supported legislation that would remove an existing immunity shield that prevents the oil cartel and its members' national oil companies from being sued under US antitrust law. It was trading above $61 on Monday.

While the Dow dropped almost 2%, some oil companies with shale exposure, including Hess (HES) and Pioneer Natural Resources (PXD), outperformed.

Anders Faergemann, a London-based fund manager at PineBridge Investments:"EM is less sensitive to oil-price fluctuations now compared to history".

Still, some small and medium-sized frackers piled on debt to take advantage of opportunities in the Permian Basin and other shale oilfields.

USA oil companies sensitive to oil price movements include frackers like Whiting Petroleum (WLL) and Oasis Petroleum as well as California Resources and Kosmos Energy (KOS), according to analysts.

On Thursday, oil prices fell as the global market has remained bearish following October's downturn amid worries of potential supply glut from world's major oil producers. The bulk of Iraq's oil is exported via its southern terminals, which account for more than 95 per cent of state revenue.

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