Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. Picture: REUTERS/AHMED JADALLAH
Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. Picture: REUTERS/AHMED JADALLAH

London — Oil prices fell on Tuesday, depressed by record Saudi Arabian production even as the kingdom tried to persuade other exporters to agree output cuts ahead of an Opec meeting next week.

Brent crude oil was down 70c a barrel at $59.78 by 8.38am GMT, still above a 13-month low of $58.41 reached on Friday. US light crude was 75c lower at $50.88.

Saudi Arabia raised oil production to a record high in November, an industry source said on Monday, pumping 11.1-million to 11.3-million barrels a day during the month.

Oil prices have lost almost a third of their value since early October, weighed down by an emerging supply overhang and widespread financial market weakness.

“The oil price correction has become a rout of historic proportions, US investment bank Jefferies said in a note on Tuesday.

“The negative price reaction is as severe as the 2008 financial crisis and the aftermath of the November 2015 Opec meeting, when the group decided not to act in the face of a very over-supplied market,” the bank said.

Norbert Ruecker, head of commodity research at Swiss bank Julius Baer, said oil had buckled after “a surprisingly swift and pronounced change in the market mood from shortage fears to glut concerns” while the world economy was also slowing down.

Traders are now awaiting the outcome of the Group of 20 (G20) meeting in Buenos Aires and also the result of a meeting of producer cartel Opec.

Leaders of the G20, the world’s biggest economies, meet on November 30 and December 1, with the trade war between Washington and Beijing at the top of the agenda. But with the top three crude producers — Russia, the US and Saudi Arabia — all present, oil policy is also expected to be discussed.

Opec meets in Vienna on December 6 to discuss output policy together with some non-Opec producers, including Russia.

Saudi Arabia has been pushing for an Opec cut, indicating it may reduce supply by 500,000 barrels a day.

US President Donald Trump has put pressure on Saudi Arabia, Opec’s de-facto leader, not to cut production, but most analysts expect Opec to start withholding some supply soon.

“We suspect that producers will start to withhold exports in the coming months, putting a floor under prices,” said Capital Economics.

Fereidun Fesharaki, chair of energy consultancy FGE, said a failure by Opec and Russia to cut supply significantly would mean crude prices would “fall further, perhaps with Brent at $50 a barrel and WTI of $40 a barrel or less”.

Reuters