Saudi Arabia has promised to reduce its oil production this December. It sent the oil prices rising last Monday morning.
Khalid al-Falih, the energy minister, said that the kingdom would be reducing its oil supply to global markets by 500,000 barrels per day in December as compared with the production this November.
The price of Brent crude oil increased by more than two percent to $71.69 per barrel, having sunk below the $70 mark during the previous week.
WTI Crude also rose further above its recent nine-month low that amounted to $60 per barrel. It traded at $61.24 on Monday morning.
Other members of Opec, the oil cartel of which Saudi Arabia is considered as the de facto leader, are also believed to be contemplating reductions in their oil supply.
An official from Kuwait said that the oil producers met over the weekend and “discussed a proposal for some kind of cut in supply next year.” He said that Iraq has also suggested that it would be supporting a cut.
The oil prices had dropped by 20 percent over the last two weeks after the sanctions of the United States that were imposed on Iran had a less severe effect on the oil supply than expected.
Donald Trump, the President of the United States of America, granted waivers to eight importers of oil from Iran, including South Korea and Japan.
An analyst at OANDA, Craig Erlam, said that the decision to reduce the supply in 2019 “doesn’t come as much of a surprise” given the high inventory data and waivers on the Iran sanctions.
He stated: “It also doesn’t bind the countries to committing to such a move and there is likely to be some debate on the need for such a move, with Russia expressing doubt.”
The prices had initially risen ahead of the sanctions being enforced and major oil exporters raised their production in an attempt to temper the increase.
Markets.com’s Neil Wilson stated: “In the short term this is a positive for oil, but we must question the impact longer term unless it’s the sign of more to come from Opec.”
He continued: “Saudi Arabia cannot act alone though – realistically it needs to pull together Opec allies and, critically, Russia to curb production if it wants prices to hold.”