The global drop in oil prices is seeing the first of many production adjustments after Saudi Arabian officials announced a cut of 500,000 barrels per day on Sunday.
Energy Minister Khalid al-Falih told reporters that national production was increased after sanctions against Iran were imposed by the U.S. in October.
However, the initial market response was an overreaction and consequently, Saudi Arabia has exceeded demands.
“All along we said that the market overreaction to the announcement on sanctions was driven by fear rather than by real shortages. Markets get it wrong occasionally as they did a few weeks ago… but ultimately the pendulum will swing to a reasonable middle," said al Falih.
Saudia Arabian and Russian officials met this weekend in the United Arab Emirates to discuss the possible daily reduction in oil production of one million barrels into next year, Organization of the Petroleum Exporting Countries said. A final decision will be announced in Vienna, Austria following the international meeting on December 6.
In an interview with Wall Street Journal, Oman’s Oil Minister Mohammed bin Hamad al-Rumhy said, “There is a consensus that there will be oversupply in 2019.”
Oil prices have decreased by over $10 per barrel or, in some cases- like the U.S., US$65.
The sanctions against Iran are part of a wider effort by U.S. President Donald Trump to curb Tehran's missile and nuclear programs and diminish the Islamic Republic's influence in the Middle East, notably its support for proxies in Syria, Yemen and Lebanon.
Iranian Foreign Minister Mohammad Javad Zarif said U.S. "bullying" was backfiring by making Washington more isolated, a reference to other world powers opposed to the initiative.
The sanctions are designed, in part, to force Iran's major customers to stop buying its oil.
However, the United States gave temporary exceptions to eight importers - China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea - allowing them to keep buying from Iran.