Crude oil futures were higher at midday in Europe Monday, as OPEC and non-OPEC partners hinted at production cuts going into 2019.
At GMT 1150, ICE January Brent futures were up 77/b cents at $70.95/b, while the NYMEX December light sweet crude contract was up 27 cents/b, at $60.46/b.
"Brent is making significant gains as the new week gets underway," Commerzbank analysts said in a note.
On Monday, Saudi energy minister Khalid al-Falih said OPEC and its partners would need to cut at least 1 million b/d from October's output levels in order to avoid oversupply, according to the group's analysis.
"We are going to be flexible," Falih said at the ADIPEC conference in Abu Dhabi, a day after co-chairing the OPEC/non-OPEC monitoring committee meeting.
"There are a lot of assumptions that may change in 2-3 weeks time," he said, adding that a key monitoring committee that met Sunday did not recommend specific cuts.
However, the committee did say it would need to consider a new strategy to maintain market balance, including reversing the 1 million b/d production rise agreed in June.
Also on Sunday, Saudi Arabia said it expected to cut its oil exports in December by as much as 50,000 b/d, citing softening demand, while Russian energy minister Alexander Novak said market surpluses for early 2019 range from 1 million b/d to 1.4 million b/d.
That apparent turnaround came after months of expectation that the arrival of US sanctions on Iranian oil would take a significant bite out of global supply, tightening the market as a result.
But subsequent gains in output from major producers, paired with exemptions by the US which have made the sanctions less restrictive than expected, have flipped the script on market fundamentals in early 2019.
"The combination of these factors means there is a risk of a sizeable oversupply on the oil market late this year and next year," Commerzbank analysts said. That, in turn, has raised questions about whether OPEC and partners would bring back production cuts to steady the market.
However, on Monday price gains appeared to be capped by further signals of rising output in the US. Friday's Baker Hughes report showed the largest week-on-week rise in the US oil rig count since May, with the rig-count rising by 12 in the latest week.
The market was waiting further fundamental cues this week, including OPEC's monthly oil market report on Tuesday, and the International Energy Agency's monthly oil market report on Wednesday.
