Why oil prices are falling

Oil prices soared in Asia today after the announcement from Saudi Arabia, the world's largest oil exporter who will cut its shipments by half a million barrels per day in December due to seasonal lower demand.

The Saudi oil minister Khalid al-Falih also met Iraqi Prime Minister Adil Abdul-Mahdi.

A senior OPEC source said the cartel and other major producers are discussing cutting production by as much as 1.2 million barrels per day.

Oil prices jumped by as much as 2% on the prospects of reduced supply from OPEC.

U.S. crude prices turned negative as U.S. President Donald Trump said he hoped there would be no oil output reductions, after Saudi Arabia said OPEC was considering cutting supply next year, citing softening demand.

"The Kingdom's crude exports for December will be 500,000 bpd lower than November", Saudi Energy Minister Khalid Al-Falih told reporters at the meeting in Abu Dhabi. We've seen a pendulum swing from one side to the other.

The kingdom's energy minister, speaking after a meeting of Opec at the weekend, said the cartel believed that production would need to fall by almost 1m barrels per day (bpd) on October levels. "The consensus is that we need to do whatever it takes to balance the market".

McNally said it was important for Saudi Arabia to signal to the markets that a production cut was coming as traders anxious about a build up in excess supplies. "We don't want to throttle the global economy".

Several analysts said oil prices were likely to turn bullish again.

Neither al-Falih nor al-Mazrouei directly criticized Trump, but Mohammed Hamad al-Rumhy, Oman's oil and gas minister, blamed the US president for some of the volatility striking the oil market. Oman, a sultanate on the eastern edge of the Arabian Peninsula, maintains close diplomatic ties to Iran and often serves as an interlocutor between Western powers and Tehran.

The group's caution arises partly from the unpredictability of Iranian supply. It's "extremely hard to quantify what is happening in (the) White House - nearly impossible". A drop off in crude oil prices in the recent period has weighed on oil and gas companies.

"Russia's contribution has helped us come out of a deep ditch".

Brent crude, the global benchmark, rose 1.2 percent to $70.99 a barrel at 10:55 a.m. Singapore time. If the decline holds, the contract is on track for its eleventh consecutive daily loss, the most on record since trading on the contract began in 1983, according to Refinitiv data.

Saudi energy minister Khaled Al Falih however would not be drawn into a discussion on whether the cuts would be made using baseline output registered for the month of October or November.

"If it was my heart beat going that way, I think I would be in the hospital right now", he said.

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