Saudi Arabia: Oil prices plummet in December on global oil glut fears
On 26 December, OPEC oil prices fell to their lowest since September 2017 (USD 50.1 per barrel) due to concerns over excess supply. In the following days, the price for the OPEC oil basket was broadly stable and, on 28 December, it traded at USD 51.6 per barrel, down 13.0% from the same day in November and 19.7% lower than on the same day in 2017.
The slide in oil prices was triggered by President Trump’s decision in early November to grant sanction waivers to eight countries, allowing them to continue buying Iranian crude oil until May. Russia, Saudi Arabia and other producing countries had already started pumping more oil in order to keep global oil markets adequately supplied in the event of a sharp reduction in Iran’s oil exports. The United States also continued to produce oil at all-time highs in recent months due to the country’s flourishing shale oil industry. On the demand side, there had been growing concerns about an economic slowdown in 2019, which would likely trim demand for energy products. Moreover, OPEC and Russia’s decision to cut oil production by 1.2 mbpd as of January in an attempt to support prices had little impact on the global oil markets. The deal was clinched at OPEC’s regular meeting on 7 December. Before the meeting, Qatar unexpectedly announced its withdrawal from the oil cartel, effective January, after nearly 60 years of membership. Although Qatari officials stated that this was driven by the Kingdom’s strategy to focus on its gas industry, analysts point out that the ongoing diplomatic spat between Qatar and Saudi Arabia likely prompted the decision.
Combined crude oil output among OPEC members was broadly stable in November at 32.97 mbpd (October: 32.98 mbpd), according to the cartel’s latest monthly report. The reading mainly reflected much lower output in Iran, which was nearly offset by rising production in Saudi Arabia (November: 11.02 mbpd; October 10.64 mbpd).