OPEC cuts 2020 oil demand forecast, urges effort to avert new glut

Pemex's storage and distribution terminal on the outskirts of Mexico City Mexico

Pemex's storage and distribution terminal on the outskirts of Mexico City Mexico

Saudi Arabia's King Salman replaced the country's energy minister with one of his own sons Sunday, naming Prince Abdulaziz bin Salman to one of the most important positions in the country as oil prices remain below what is needed to keep up with government spending.

But analysts said the reshuffle would send shockwaves through the global energy industry at a time when Saudi Arabia - the de facto leader of Opec - and its oil-producing allies have struggled to raise crude prices.

'We are proceeding with it cautiously. we are experimenting with two nuclear reactors, ' Prince Abdulaziz bin Salman said, referring to a plan to issue a tender for the Gulf Arab state's first two nuclear power reactors.

His remarks suggest he will continue a similar policy to that of his predecessor, Khalid al-Falih, who led the deal to cut global production among major producers. The capital from the sale will go into the sovereign wealth fund, run by Rumayyan, to help boost the economy and create new, non-oil sectors.

Morgan Stanley last month lowered its oil price and demand forecasts for the rest of the year, citing a weaker economic outlook, faltering demand and higher shale oil output. -China trade war, and increased USA output.

"Worryingly, the focus of the government seems to have moved away from the profound structural changes to the company setting and labour market required to reform the Saudi economy and decrease its dependence on oil", Turvey stated.

Novak also said the current oil price was determined by the market, according to the reports.

As luck would have it, Union Petroleum Minister Dharmendra Pradhan met the new Saudi Energy Minister Prince Abdulaziz bin Salman in Jeddah on Monday, kicking off his tour of Saudi Arabia, Qatar and the UAE. Saudi Arabia has shouldered the bulk of OPEC+ production cuts, and is pumping about 500,000 barrels a day less than its agreed cap. USA production generated a record 12.65 million barrels per day (MBD), based on August data as new export pipelines projected in the coming months prompt U.S. energy officials to produce some 13.85 MBD by end of 2019.

In April the head of the IAEA said his agency was asking Saudi Arabia to agree to safeguards on nuclear material that could arrive by the end of the year for its first atomic reactor.

Al-Falih's biggest achievement of his three-year term was managing OPEC's agreement with Russian Federation, which saw the world's No. 2 exporter agree to formal curbs on production for the first time as the global oil market adjusted to a flood of American shale oil.

Prince Abdulaziz is a known figure among OPEC members and industry insiders.

"I expect no deviation from Saudi policy".

While the group's main power-brokers see no need for discussion of deeper curbs at the moment, they acknowledge that the situation next year needs to be reviewed, said a person familiar with the matter, who asked not to be identified because the information isn't public.

Shares of energy companies rose alongside oil futures after Saudi Arabia's latest pledge to cap production.

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