‘Markets have got it wrong’ Saudi Arabia tries to justify decision to cut oil production

The Saudis are cutting the number of barrels they produce by 500,000 a day in December, with this reduction likely to double to a million a day next year – but Mr Falih did not foresee any major problems. The decision came following a sharp drop in crude oil prices, as fears recede over the impact of US sanctions on Iran, especially given the Donald Trump’s administration has granted several major countries including Japan and China. Speaking at the Joint Ministerial Monitoring Committee (JMMC) meeting in Abu Dhabi on Sunday, Mr al-Falih told CNBC he believed the energy market had “over-corrected” in recent weeks.

He said: “All along we said that the market overreaction to the announcement on sanctions was driven by fear rather than by real .

“Markets get it wrong occasionally as they did a few weeks ago on one side and they’re doing it again on the other today, but ultimately the pendulum will swing to a reasonable middle.

Mr al-Khalid said neither countries aligned with the Organization of the Petroleum Exporting Countries (OPEC) nor other oil-producing nations would be afraid to cut production levels once more in the next few weeks if they deemed it necessary.

OPEC’s next full meeting, at which any policy decision will be ratified, will take place in Vienna on December 6.

Roughly two dozen oil exporting nations started capping production last year amid fears about a global glut of crude oil.

have tumbled by about 20 percent in recent weeks, after climbing to a peak in early October.

Brent crude was valued at £54.58 ($70.18) on Friday, down by almost one percent, while US West Texas Intermediate (WTI) is priced at £46.56 ($59.87).

Mr al-Falih said the previous spike in oil prices had been “an emotional overreaction”.

He added: “I think the decisions that came out in Washington with granting the waivers and with the volumes starting to show themselves and weekly inventory data, the market flipped from overreacting from one side to overreacting on the other side.”

Speaking at an industry event in Abu Dhabi on Monday, Mr al-Falih said OPEC and its allies agreed technical analysis showed a need to cut next year by around one million barrels per day (bpd) from October levels to balance the market.

He said: “If all things remain equal, and they almost certainly will not as things will change – it is a dynamic market – then the technical analysis we saw yesterday tells us that there will need to be a reduction of supply from October levels approaching a million barrels.

“The consensus is that we need to do whatever it takes to balance the market. 

“If that means trimming supplies by a million bpd, we will.”

He added that US sanctions against had not so far had the impact expected.

He explained this was partly due to the decision to grant waivers enabling some countries to continuing buying Iranian oil.

The eight in question – China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea – are among Iran’s biggest customers.

Mr al-Falih said: “Sanctions didn’t cut so much out of the market as anticipated.”