CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange nearest delivery and the Brent contract on the Intercontinental Exchange were higher in early trading Monday, with West Texas Intermediate and Brent climbing on reports over the weekend that Saudi Arabia would cut oil production by 500,000 barrels per day (bpd) while the Organization of the Petroleum Exporting Countries are evaluating adjustments in their output rates after determining oil supply will outpace demand globally in 2019.
Ahead of OPEC's Dec. 6 biannual meeting in Vienna, a committee overseeing a production arrangement between OPEC and 10 non-OPEC oil producers said a review of the current market's oil supply-demand disposition showed an oversupplied market in 2019.
"The Committee also noted that the dampening of global economic growth prospects, in addition to associated uncertainties, could have repercussions for global oil demand in 2019 -- and could lead to widening the gap between supply and demand," said OPEC following the Joint Ministerial Monitoring Committee's meeting on Sunday in Abu Dhabi.
JMMC will meet one more time before OPEC's December meeting, with the committee to develop options for OPEC to consider "which may require new strategies to balance the market."
The Saudis see the need for 1.0 million bpd in production cuts. Russia, who leads the non-OPEC producer contingent, are pushing back on the idea of reducing output. Oil companies in Russia that have spent heavily on improvements in their upstream industry don't want to slow output that's currently at a post-Soviet high. Russia has also adjusted its budget needs that allow a lower oil price after getting caught during the 2014 downturn when it counted on a plus $100 barrels (bbl) price to balance its budget.
These developments come as a study commissioned by Saudi Arabia will consider the consequences of an OPEC breakup. The study comes as Iranian oil exports have fallen under U.S. sanctions, while Tehran has accused some members of OPEC of turning the group's technical committees "into political tools in support of U.S. policies against I.R. Iran."
After 10 consecutive down sessions, the most since 1984, WTI December futures were up nearly $1.00 near $61.10 bbl, advancing despite a sharply stronger U.S. dollar that traded at a 17-month high Monday morning.
ICE January Brent futures were up $1.00 near $71.20 bbl, with Brent joining WTI futures in bear territory on Friday.
Nymex December ULSD futures were up nearly 1.0 cent in choppy trade near $1.1815, with a moderating weather forecast seeing a shorter duration of low temperatures in the Northeast. The National Oceanic and Atmospheric Administration's Climate Prediction Center forecasts below normal temperatures in its 6- to 10-day forecast, which moderate towards normal in its 8- to 14-day outlook.
Nymex December RBOB futures were up about 3.0 cents near $1.6510 gallon after settling at a $1.3214 gallon 13-month low on the spot continuous chart on Friday.
Brian L. Milne can be reached at firstname.lastname@example.org
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