Nigeria, Saudi Arabia Strategise On Oil Market Stability

Nigeria, Saudi Arabia Strategise On Oil Market Stability

Nigeria, Saudi Arabia Strategise On Oil Market Stability

One of the world's major oil contracts, New York's WTI, slumped under $50 per barrel on Thursday, reaching the lowest level in almost 14 months.

Saudi Arabia's energy minister, Khalid al-Falih, must play a bad hand of cards as well as he can at next week's meeting of OPEC and non-OPEC oil producers in Vienna.

The choice facing Saudi Arabia at next week's OPEC meeting is dramatic: cut oil production and enrage Donald Trump, or keep pumping and risk ultra-low prices blowing up its economy.

Both worldwide oil benchmarks, North Sea Brent LCOc1 and USA light crude CLc1, have had their weakest month for more than 10 years in November, losing 28 percent and 30 percent respectively as global supply has outstripped demand.

But oil trade, vital for Russian economy, is conducted in United States dollars, a "monopoly" Russia's President Vladimir Putin wants to end.

"While oil retreated on oversupply concerns and it's still possible that it could teeter in the short term, prices will go higher in the mid- to long-term", Lim Jaekyun, a commodities analyst at KB Securities Co., said by phone in Seoul.

To rein in the glut, OPEC and its main partner Russian Federation are discussing supply cuts and are due to meet in Vienna on December 6 and 7 to agree production strategy.

Global benchmark Brent crude LCOc1 gained 6 cents, or 0.1 percent, to $58.82 a barrel, having dropped 2.4 percent on Wednesday to $58.76 a barrel.

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At the time, OPEC decided not to cut production in order to retain market share and undercut US shale producers.

The kingdom can ill-afford another slump in oil revenues so soon after the last one, which suggests it will have to cut production, while trying to cajole other OPEC and non-OPEC countries to share the burden.

Iraq is still struggling to overcome the legacy of warfare and sanctions, 15 years after a US-led coalition overthrew dictator Saddam Hussein. This increase in the country's oil inventory was fed by increasing oil imports. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many United States politicians to impose stiff sanctions on Riyadh.

"Certainly, we are thinking about what we need to do in order to get free of this burden", Putin said in May. The global benchmark crude traded at an $8.45 premium to WTI.

"Even if Russian Federation and Saudi Arabia reach an agreement at the G-20 to decrease output", other countries might respond by increasing their output, Kocaman said. That doesn't mean the Kremlin is about to give up its alliance with Saudi Arabia, which extends beyond oil, but it means could drive a hard bargain.

"We are in contact with OPEC and we are ready to continue our joint efforts if needed", Putin said.

Most people agreed that Russian Federation can't immediately reduce production and if it joins the cuts, it will cut output gradually, like it did the previous time, the source told Reuters.

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