NEW DELHI: Crude oil prices shrugged off a month-long slump on Monday to jump 2 per cent, after Saudi Arabia’s energy minister called for a global output cut of one million barrels per day. The de-facto leader of the oil producers’ cartel Opec also unveiled plans to begin with a 500,000 barrels a day cut as early as December.
The announcement, made after Opec’s members met in Abu Dhabi, saw brent crude prices spike to $71.60 on the spot market (2 per cent), and resulted in shares of oil marketing and aviation companies tumbling up to 6.3 per cent in the Indian stock markets.
The scrip of Hindustan Petroleum Corporation Ltd tanked 6.23 per cent, Indian Oil Corporation Ltd fell 4.59 per cent and Bharat Petroleum Corporation Ltd lost 1.87 per cent on BSE, while Jet Airways (India) Ltd tumbled 5.96 per cent, InterGlobe Aviation Ltd fell 4.32 per cent and SpiceJet dropped 3.53 per cent.
Saudi Arabia’s call to cut prices come as producers try to re-balance a market where demand projections are now expected to be much lower than a few months ago, when OPEC and other oil producers committed to increase supply to forestall any supply shortage.
However, Saudi Arabia’s energy minister Khalid Al Falih said on Monday that “the technical analysis reviewed yesterday shows that we need a reduction approaching one million bpd to balance the market”.
The proposed reduction is from October production levels, Falih said, adding that Saudi Arabia would cut its production by 500,000 bpd as of next month to help stabilise the market.