Oil prices advance as Saudi to cut output

Higher crude lifted shares across the commodities sector, helping London's FTSE 100 index featuring the likes of BP and Shell, to rise slightly overall.

Oil prices advance as Saudi to cut output

Oil prices advanced Monday after crude kingpin Saudi Arabia announced plans to cut output in the face of global oversupplies and demanded that other producers followed suit.

Tobacco stocks however slumped, with British American Tobacco shedding 9.2 percent to £30.10 and Imperial Tobacco losing 4.0 percent on reports of a planned US ban on menthol cigarettes, which are seen as posing a greater health risk than traditional ones.

In the eurozone, the Frankfurt and Paris stock markets dropped, weighed down in part by lingering concerns over Italy's high debt and ahead of Tuesday's EU-deadline for Rome to revise its 2019 budget.

The euro struck a 17-month low at $1.1240 on Monday, hit also by Brexit clouds which weighed on the pound as well.

"Continued uncertainty over the pathway for Brexit is providing greater downside for sterling," noted Joshua Mahony, market analyst at IG trading group. 

"Meanwhile, a Saudi... output cut for December has helped boost ailing oil prices." 

Saudi Arabia's energy minister on Monday called for a global output cut of one million barrels per day to re-balance the market, as Riyadh unveiled plans to trim its own production by 500,000 bpd from December.

Khalid al-Falih's comments follow a meeting in Abu Dhabi at the weekend, where the OPEC group and its allies had already started laying the groundwork to reduce supply in 2019, reversing an almost year-long expansion.

Oil prices have shed about one fifth of their value over the past month on oversupplies and signs of a softer-than-expected impact from US sanctions on Iranian crude exports.

In trading on Monday, benchmark oil contract Brent North Sea crude gained almost a dollar.

"In the short term this (output cut) is a positive for oil, but we must question the impact longer term unless it’s the sign of more to come from OPEC," said Neil Wilson, chief market analyst at Markets.com. 

"Saudi Arabia cannot act alone though -- realistically it needs to pull together OPEC allies, and critically Russia, to curb production if it wants prices to hold. The language from Russia suggests it is not ready to follow the Saudis yet."

Last week, higher US energy stockpiles drove WTI crude to its longest losing streak in more than 30 years, while Brent dropped below $70 a barrel for the first time since April.

Elsewhere on Monday, Shanghai stocks rebounded ahead of key Chinese economic releases due this week.