Saudi Arabia mulls cutting oil exports by 1 million bpd: Report
Saudi Arabia may unilaterally cut its oil exports by 1 million barrels a day (bpd) in the face of a market glut which is the result of years of overproduction.
Riyadh is hard pressed for oil revenues as its protracted war in Yemen is taking a heavy toll on the kingdom’s overall budget.
According to a UK-based consultancy, a 1 million bpd cut in experts was on the table by Saudi Arabia because a sharp increase in US oil supplies and overproduction by some OPEC members were derailing an attempt to balance the market.
OPEC and non-OPEC producers such as Russia have been implementing an agreement since January to knock off 1.8 million bpd from their production but prices have kept falling.
Market analysts say the steady rise of shale rig numbers in the US is undermining other major producers’ bid to drain the chronic glut in the oil market.
Saudi Arabia’s initiative, however, is a response to a rise in supplies by OPEC members Libya and Nigeria which are exempt from the cuts, the Petroleum Policy Intelligence (PPI) said.
“First, Saudi Arabia is considering cutting its exports unilaterally by up to a further 1 million bpd, which would offset the rise in Libyan and Nigerian supplies,” the group’s Bill Farren-Price wrote.
Farren-Price said the possible cut was a response to Russia’s demand that supply caps be introduced for Libya and Nigeria. He expected “an adjusted strategy” to be taken at the Joint Ministerial Monitoring Committee meeting in Russia on July 24, where OPEC members will review the cuts so far.
On Tuesday, a Saudi energy official was quoted as saying by Reuters that the kingdom remained committed to work with other oil producers to address the rise in output from Nigeria and Libya and other changes in global supply.
Official data released on Tuesday showed Saudi Arabia’s crude oil exports in May fell to 6.924 million bpd from 7.006 million bpd in April.
For years, Saudi Arabia and other Persian Gulf states pushed OPEC’s strategy to expand market share rather than cut output, leading to the current crisis.
Oil prices rose slightly on Wednesday, with benchmark Brent crude settling up 42 cents at $48.84 a barrel. US light crude rose 38 cents to $46.40.
Gains were however modest due to Ecuador’s announcement on Monday that the OPEC member would no longer comply with the production cut agreement due to the country’s financial difficulties.
While Ecuador’s return of 26,000 bpd may not factor in the overall situation, its decision may encourage other producers to bow out of the OPEC agreement.
In a further bad news for the oil market, the US Energy Department said on Monday that the country’s shale oil production was set to rise for the eighth consecutive month in August by 112,000 bpd to 5.585 million bpd.