Brent above $56 as Saudi Arabia signals it will cut crude allocations by 560,000 barrels per day

LONDON: Saudi Arabia is spearheading oil output cuts agreed by OPEC last year, having disclosed this week that it is cutting November crude allocations to 7.15 million barrels per day (bpd) despite “very strong demand” for 7.7 million bpd.

The cut of about 560,000 barrels per day, revealed on Monday by the Saudi Ministry of Energy, reflects OPEC’s determination to support the oil price by reducing surplus inventories and reining in production.

Brent crude was up 52 cents at $56.31 in Europe on Tuesday afternoon following the release of the data.

Cuts in production agreed by OPEC members last year have helped to support the oil price. Although that agreement expires in March 2018, it could be extended further, according to Russian President Vladimir Putin, speaking during last week’s historic visit to Moscow by Saudi King Salman.

Richard Mallinson, an oil analyst at Energy Aspects in London was upbeat about the outcome of the production cut deal. “We’re seeing a market shift as stockpiles begin to clear, and there will be more demand,” he told Bloomberg.

Abhishek Kumar, a senior energy analyst at Interfax’s Global Gas Analytics (GGA), said Saudi Arabia’s action underlines its determination to balance supply and demand going forward.

But oil exports from the US were rising as well, said Kumar.

“The price differential between Brent crude and West Texas Intermediate (WTI, used as a benchmark for US oil prices) was widening,” he told Arab News.