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Oil prices are dropping after Saudi Arabia announced lowering supply in December



SINGAPORE (Reuters) – Oil prices rose by more than 1.5 percent on Monday after first-line exporters reported a decline in supply in December, and other manufacturers also considered reductions in 2019.

Pumpjack is visible at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. REUTERS / Christian Hartmann

Futures contracts for Brent oil from the first month of LCOc1, the reference point for world oil prices, was 71.59 USD per barrel in 0749 GMT, an increase of 2 percent compared to the last shutdown.

Futures market futures in Texas (WTI) increased by 1.6 percent to $ 61.15 a barrel.

Saudi Arabia plans to reduce oil supplies to world markets by 500,000 barrels per day (in December), the energy minister said on Sunday, because the country has uncertain prospects that other producers would agree to a coordinated reduction of production.

Khalid al-Falih told reporters that Saudi Aramco's client appointments will fall by 500,000 barrels a day in December compared to November due to seasonal lower demand. The cut is a reduction in global oil supply by about 0.5 percent.

Saudi Arabia is the de facto leader of the Organization of Oil Exporting Countries (OPEC).

An official from Kuwait, also an OPEC member, said on Monday that major oil exporters over the weekend "discussed a proposal for some reduction (severe) supply next year", although the official did not provide any details.

The second largest producer of OPEC, Iraq, also indicated that he could join such a move.

Peter Kiernan, chief energy analyst at the Economist Intelligence Unit in Singapore, said OPEC "focuses on reducing the risk of decline" after a drop in oil prices by about 20 percent in a month after a sharp increase in supply, particularly from the three largest producers, US United States, Russia and Saudi Arabia.

For consumers, reducing oil prices by 20 percent from the beginning of October was a relief.

"This (price drop) is great news for Asian economies that are difficult outside, such as Indonesia and the Philippines, including India, and also helps where inflation was a problem," said Robert Carnell, chief economist and head of research at ING Asia. Reuters Global Markets Forum on Monday.

Major emerging markets such as India, Indonesia and Turkey were under strong pressure earlier this year as their currencies fell against the dollar at a time when oil prices soared, which weakened demand.

In addition to demand-related concerns, Saudi Arabia and other traditional producers in the Middle East are facing a sharp rise in production in the US.

American energy companies last week added 12 drilling platforms in the week of November 9, seeking new reserves, bringing the total to 886, the highest level since March 2015. She informed Baker Hughes on energy services on Friday.

The number of equipment indicates that the crude oil production in the US C-OUT-T-EIA, already at a record level of 11.6 million barrels per day, will increase even more.

"One thing that is obvious enough is OPEC is a shake-up shock because US oil production has risen to a record 11.6 million barrels a day and will exceed the threshold of 12 million next year," said Stephen Innes, head of trade for Asia and the Pacific at Oanda futures broker house in Singapore.

Report by Henning Gloystein; additional reports from Divya Chowdhura in Mumbai; editors: Richard Pullin and Christian Schmollinger

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