Top oil exporter Saudi Arabia triggered a price rise by announcing a cut in production from December.
The key Organization of the Petroleum Exporting Countries (OPEC) player is turning the tap off on 500,000 barrels of crude a day after trying unsuccessfully to encourage other producers to cut their output.
Energy Minister Khalid al-Falih explained the cut was due to a seasonal fall in demand.
The move amounts to around a 0.5% fall in global oil production.
OPEC countries had discussed dropping production in recent days but had failed to reach an agreement.
Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said OPEC was “focused on mitigating downside risks” after crude prices declined by around a fifth over a month following a supply surge from the top three producers, the United States, Russia and Saudi Arabia.
New rigs
“This is great news for the externally challenged economies of Asia like Indonesia and Philippines, India too, and helps also where inflation has been a concern,” Robert Carnell, chief economist and Head of Research at ING Asia said.
The rising US oil output is a concern for other major oil producers.
US energy firms opened 12 new rigs last week and output has hit a record 11.6 million barrels a day and is still increasing.
“OPEC is in for a shale shocker as US crude production increases to a record and will cross the 12 million threshold next year,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
Oil production is also set to adjust as US sanctions on Iran start to bite, although some nations are still allowed to buy from the alleged rogue state.
Market share
The underlying problem for OPEC and other major oil producers outside the cartel – including the US and Russia – is the battle for market share.
Governments are wary of cutting production as their market share and revenue decreases.
The continuing problem cripples OPEC as a policy maker and market leader as members are continually bickering behind the scenes.
OPEC members are set for a summit in December to discuss output for 2019.
The price of Brent crude is trading 2.4% up at $67.04 a barrel
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