Brent crude jumps 2% on Saudi plan for December supply cut

File photo of the production facility of Saudi Aramco's Shaybah oilfield in the Empty Quarter, Saudi Arabia, on May 22, 2018.
File photo of the production facility of Saudi Aramco's Shaybah oilfield in the Empty Quarter, Saudi Arabia, on May 22, 2018.PHOTO: REUTERS

SINGAPORE (REUTERS) - Brent crude oil prices jumped by 2 per cent on Monday (Nov 12) after top exporter Saudi Arabia announced a supply cut in December, a measure likely aimed at halting a market slump that has seen crude decline by 20 per cent since early October.

Front-month Brent crude futures, a benchmark for global oil prices, were at US$71.59 per barrel at 0644 GMT, up by 2 per cent from their last close.

US West Texas Intermediate (WTI) crude futures rose 1.5 per cent to US$61.08 per barrel.

Saudi Arabia plans to reduce oil supply to world markets by 0.5 million barrels per day (bpd) in December, its energy minister said on Sunday, as the Opec power faces uncertain prospects in getting other producers to agree to a coordinated output cut.

Khalid al-Falih told reporters that Saudi Aramco's customer nominations would fall by 500,000 bpd in December versus November due to seasonal lower demand. The cut represents a reduction in global oil supply of about 0.5 per cent.

Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries (Opec).

Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said Opec was "focused on mitigating downside risks" after crude prices declined by around 20 per cent over a month following a supply surge, particularly from the top three producers the United States, Russia and Saudi Arabia.

For consumers, the 20 per cent oil price fall since early October was a relief.

"This (price fall) is great news for the externally challenged economies of Asia like Indonesia and Philippines, India too, and helps also where inflation has been a concern," Robert Carnell, chief economist and head of research at ING Asia, told the Reuters Global Markets Forum on Monday.

Major emerging economies like India, Indonesia and Turkey came under strong pressure ealier this year as their currencies slumped against the dollar just as oil prices surged, eroding demand.

Beyond demand concerns, a big concern for Saudi Arabia and other traditional producers from the Middle East-dominated OPEC is the surge in US output.

US energy firms last week added 12 oil rigs in the week to Nov 9 looking for new reserves, bringing the total count to 886, the highest level since March 2015, Baker Hughes energy services firm said on Friday.

The rig count indicates US crude output , already at a record 11.6 million bpd, will increase further.

"One thing that is abundantly clear, Opec is in for a shale shocker as US crude production increased to a record 11.6 million barrels per day and will cross the 12 million threshold next year," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.