Oil prices fall on swelling glut, economic growth concerns

OPEC and non-OPEC nations agreed Friday to reduce global oil production. File

OPEC and non-OPEC nations agreed Friday to reduce global oil production. File

Saudi Arabia has indicated it wants the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to cut output by at least 1.3 million barrels per day, or 1.3% of global production.

Minister of Energy, Industry and Mineral Resources of Saudi Arabia and chairman of Saudi Aramco, Khalid A Al-Falih recently spoke about reduced crude oil prices and mentioned that Prime Minister Narendra Modi was among the vociferous leaders of various countries who pitched for lowering down the oil prices.

Iran's OPEC governor Hossein Kazempour Ardabili said on Tuesday that any meaningful cuts in production must be made by the countries which have pumped above their quotas in breach of a 2007 deal between OPEC and non-OPEC oil producers.

The current 1.8 million barrels per day production cut will expire in December.

Events in the Austrian capital weren't the only story on Thursday. "Ideally, everyone should join equally".

Negotiations between OPEC members are fraught, as some feel that Saudi Arabia wields too much clout in setting policy.

OPEC agreed in principle to cut production during a meeting at its headquarters in Vienna, Austria on Thursday, two sources told Reuters.

While Middle Eastern producers are desperate to reverse the recent slump in prices to pay for government spending, sensitivities are different in Russian Federation, where the government is running a budget surplus and a weak ruble mitigates the impact of lower prices. Saudi Oil Minister said that PM Modi in a private meeting had pitched for cheaper fuel prices which strongly shows that he does care about the Indian consumers.

"America turned into a net oil exporter last week, breaking 75 years of continued dependence on foreign oil and marking a pivotal - even if likely brief - moment toward what U.S. President Donald Trump has branded as 'energy independence, '" writes Bloomberg.

Some saw it as a sign that the group of oil-producing nations may not have the political unity to rein in supply and is suffering under political pressure from U.S. President Donald Trump to not push prices up again.

"We don't need permission from anyone to cut", Saudi minister Al-Falih said. He said the OPEC countries were still discussing the distribution of the cuts between them.

"If you look at the Canadian producers, when you're looking at the wide spreads of the Western Canadian Select versus WTI, you look at some of the real cost to get some of the crude out of the Bakken because the pipelines are full - I think we are going to start seeing a slowdown in drilling if they don't see some prices turn around", Heminger warned, but noted that he doesn't expect the slowdown to be "dramatic". If Russia does agree a cut, it would take three to four months to fully implement it, he said.

The lower prices may lead to a slowdown in drilling activity and lower investments in the shale patch, US oil industry executives and analysts say. "Especially the big boys - they would want to keep this cut very close to their heart".

OPEC is also riven by internal conflict, particularly the rivalry between Saudi Arabia and Iran.

OPEC daily output stood at 32.99 million barrels in October, according to the International Energy Agency.

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