Top oil exporter Saudi Arabia says it has cut its oil output by 400,000 barrels per day (bpd), a cutback coinciding with a drop in oil prices toward the kingdom’s preferred level of $100 a barrel.
Riyadh, supported by Kuwait and the United Arab Emirates, has boosted supply informally to cover for unplanned outages in other OPEC members in recent months including Libya, which is now seeing its production, recover.
Saudi Arabia told OPEC that it produced 9.597 million bpd in August, down from 10.005 million bpd in July. Analysts noted its output often falls when domestics demand for air conditioning declines from its summer peak and lower production does not necessarily mean lower exports. The Organisation of the Petroleum Exporting Countries also cut its forecasts for demand on Crude this year and next, pointing to a supply surplus of more than 1 million bpd in 2015 if it keeps output at current levels.
Oil prices have slid due to concern about weakening demand and ample supplies, raising the question of whether Saudi Arabia, holder of the world’s largest spare output capacity, will curb output. Brent Crude fell below $100 for the first time in 14 months.
So far, OPEC officials have not expressed a pressing concern about the drop in prices, seeing it as a temporary dip and predicting prices will rise as higher seasonal demand kicks in due to colder weather. Kuwait’s OPEC governor said that she expected prices to rise and maintain the $100-a-barrel level.
According to these, Saudi Arabia cut output by 55,000 bpd to 9.86 million bpd in August but overall OPEC output rose to 30.35 million bpd, due to recovery in Libya and higher exports from Angola.
With OPEC now forecasting global demand for its crude of 29.20 million bpd -160,000 bpd less than previously thought- the report indicates supply will exceed demand by 1.15 million bpd next year should OPEC keep pumping at August’s rate.
Rising supply outside OPEC, particularly the United States due to its shale energy boom, has squeezed OPEC’s market share. U.S. crude output averaged 8.6 million bpd in August, the highest since 1986.
OPEC’s next meeting to review output policy is in November.
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