Oil market watchers have been closely monitoring the situation to determine how the oil production cut will affect the oil prices, which is expected to soar for fiscal year 2019, according to some analysts.
In 2016, via its state-owned oil company Petroliam Nasional Berhad, Malaysia announced that it would cut oil output by 20,000 barrels per day as part of its commitment to reduce supply following an agreement between the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers.
Brent crude fell 5 cents to $60.15 a barrel, off the session high of $61.43 a barrel.
"The more OPEC+ tries to support prices by withholding oil from the market, the more they give the USA shale sector an out from rationing supply growth themselves", Citi said in a research note written by a team led by Ed Morse, the firm's global head of commodities.
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Crude oil prices fell early Monday as China-related tensions weighed on the market, while the impact of the OPEC plus production cut announced last week was offset by concern about USA rising output. "Today's decision is a very important step for the oil producers, the oil market and the future of the oil industry", he said.
He appreciated the decision of the OPEC + countries to regulate the oil market and stabilize the oil prices.
Iran maybe exporting around 1 million barrels per day now and any reduction may tighten the oil markets, especially around seasonally strong demand during summers. Iran has been compromised as well as Libya and Venezuela, considering USA sanctions. The slower economic growth is expected to influence the demand for oil next year and along with the growing production in the United States, the prices are estimated to decline eventually. Since Canada's top oil-producing province announced mandatory output curbs on December 2, the spot price of Western Canada Select crude has surged more than 70 percent. The contributions from OPEC and non-OPEC will correspond to 800,000 barrels per day and 400,000 barrels per day, respectively.
Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing nearly 30 percent in value.
OPEC agreed to cut production by 800,000 barrels bpd, led mainly by Saudi Arabia, while non-members will cut by 400,000 bpd, with most of that shouldered by Russian Federation.