U.S. oil prices rebounded on Wednesday morning after Reuters reported that Organization of the Petroleum Exporting Countries (OPEC) and its allies are mulling cutting supply by 1.4 million barrels per day.
Reuters said Opec are discussing pumping less oil a few months after Russia and Saudi Arabia agreed to raise production. Members of the organization will meet next month at their headquarters in Vienna, Austria to agree on their 2019 policy.
West Texas Intermediate oil for December delivery jumped 2.9 percent to $57.29 a barrel after a slump of 7% in Tuesday’s session. Global benchmark Brent crude jumped 2.4% to $67.01 after entering a bear market in the previous session.
Oil prices suffered 12 consecutive days of declines amid fears of dwindling demand and oversupply by the U.S., Saudi Arabia, and Russia. Ongoing trade friction between China and the U.S. is also likely to dampen oil prices if it causes a slowdown in global economic activity.
Speaking at an energy conference in Abu Dhabi this week, Saudi Arabia energy minister called for a global production cut of 1 million barrels per day to shore up falling prices. Khalid al-Falih made the announcement a day after Saudi Arabia promised to cut shipments by 0.5 million barrels per day in December after a massive slump this month overshadowed a summer rise in prices.
On Monday, President Donald Trump hit back at Saudi Arabia for the plan, further stirring tensions between the two allies, a month after the murder of journalist Jamal Khashoggi in Istanbul, Turkey. The President tweeted, “Hopefully, Saudi Arabia and Opec will not be cutting oil production. Oil prices should be much lower based on supply!”
Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!
— Donald J. Trump (@realDonaldTrump) November 12, 2018
Analysts believe that OPEC was caught unaware by Trump’s decision to allow Italy, China, Turkey, India, Greece, Taiwan, Japan, and South Korea to continue importing oil from Iran for a limited time. John Kilduff, founding partner at Again Capital said, “That really messed up [OPEC’s] calculus. The waivers really undercut that.”