UAE Energy Minister Suhail al-Mazrouei, left, talks to Khalid Al-Falih, Saudi Energy and Oil Minister, in the opening ceremony of the Abu Dhabi International Exhibition & Conference, ADIPEC, in Abu Dhabi, United Arab Emirates, Monday, Nov. 12, 2018. Oil futures had gained as much as 2.4 percent in London and 1.8 percent in NY after the Saudi announcement.
The drop in prices came after the USA said it would allow eight countries, including India, to continue importing crude from Iran.
However, at the global level, it will be a new blow to consumers, who will have to pay more for gasoline, and will increase transport expenses of the companies. "Oil prices should be much lower based on supply", appears to have contributed to crude's fall from earlier higher levels in the session.
In trading on Monday, benchmark oil contract Brent North Sea crude gained nearly a dollar. They fell below the 60-dollar mark.
Dutch bank ING said given the abundance of global supply as well as the threat of an economic slowdown, "cuts over 2019 are unavoidable.(as) it is becoming clearer that as we move closer towards 2019, the market will see a sizeable surplus at least over the first half of 2019".
"One of OPEC's biggest problems right now is the surge in US output".
This has left OPEC scrambling to adjust its own output, which, at around 33.3 million bpd, accounts for roughly a third of global supply.
While market analysts worry over a suddenly bearish market, Mr Al Falih cautioned against being driven too keenly by sentiment over fundamentals and that the group must support members facing critical challenges due to sanctions and other disruptions. Hedge funds and other money managers have reduced their long position in oil contracts to their lowest since August of 2017 last week. While global spending on new and existing oil and gas projects will rise 5 percent this year to $480 billion - almost 40 percent less than in 2014 - investment won't reach the $600 billion the industry needs annually through the next decade to meet future demand, according to consultant Wood Mackenzie Ltd.
Sixty-two per cent of GIQ Survey respondents agreed that the U.S. shale production levels will force Gulf Arab countries into stepping up their own investment in shale oil exploration.
An official from group member Kuwait said on Monday major oil exporters had over the weekend "discussed a proposal for some kind of cut in (crude) supply next year", although the official did not provide any detail.
The rig count indicates USA crude output C-OUT-T-EIA , already at a record 11.6 million bpd, will increase further.
In this light, Saudi Arabia has announced a new round of output cuts aimed at supporting the prices - which are, in the near-term, still expected to remain at that country's fiscal breakeven, estimated at roughly $70/bbl.