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Saudi Oil Output Drops Under OPEC Quota Close to Two-Year Low

 

By Mahmoud Habboush, Anthony Dipaola and Sam Wilkin
January 12, 2017, 3:49 AM EST updated January 12, 2017, 7:29 AM EST


• Oil minister says he may consider renewing cut in six months
• OPEC agreed with other producers to pare output from Jan. 1


Saudi Arabia has reduced oil production to less than 10 million barrels a day,
below its targeted level, and will consider renewing its pledge to cut crude
output in six months, Energy Minister Khalid Al-Falih said.


The world’s biggest oil exporter is currently producing at a 22-month low. It
had agreed to cut 486,000 barrels a day to 10.058 million barrels a day as part
of a global deal to reduce output to curb a supply glut. The caps on production,
together with rising demand and natural decreases in output in some
countries, will help balance the market and support prices, Al-Falih said in a
speech at an energy conference in Abu Dhabi.


“Oil production now is below 10 million so far,” he told reporters later on
Thursday. “So we’re going the extra mile to lead our colleagues within and
outside of OPEC to make sure that the market sees that there’s serious action
in place.” Kuwait has also exceeded its targeted cut, according to that country’s
oil minister.


Saudi Arabia is due to meet fellow members of the Organization of Petroleum
Exporting Countries in May at their bi-annual meeting in Vienna to assess the
market and the group’s production policy. OPEC states will also gather with
major producers outside the group later this month in the Austrian capital to
monitor their compliance with the production cuts, which aim at shoring up
prices. Benchmark Brent crude was 71 cents higher at $55.81 a barrel in
London at 12:17 a.m. local time.


Oil Inventories
“We have been moving toward a re-balanced market for some time -- too
slowly to my liking,” Al-Falih said. “The pace of re-balancing will be
accelerated due to the recent agreements within OPEC and with our party
from outside” the group. “We will consider renewing” the agreement after six
months, he said. Saudi oil output was last below 10 million barrels a day in
February 2015, according to data compiled by Bloomberg.


Al-Falih’s comments amplified remarks made earlier at the same event by
OPEC Secretary-General Mohammad Barkindo, who said global oil
inventories will start to fall by the second quarter of this year and that crudeproducing
countries will decide in May whether to extend their output cuts
beyond the first half.


Global macroeconomic numbers have responded “positively” to the agreement
between OPEC and non-OPEC producers to pare output, Barkindo said at the
Atlantic Council Global Energy Forum. “We have our target in accelerating
those draw-downs to bring them closer to the five-year level -- that is our
target,” he told reporters. OPEC isn’t targeting a specific price for crude, he
said.


Kuwait Cuts
The cuts began on Jan. 1 and are to stay in effect though June. Oil markets
should be in balance in six months, and it’s premature to decide whether
additional cuts will be needed, United Arab Emirates Energy Minister Suhail
Al Mazrouei said at the Abu Dhabi conference. Countries with a naturally
declining output of oil are contributing to a decrease in global production, he
said.


Kuwait has cut 133,000 barrels a day of oil output and is currently producing
2.7 million barrels a day, Oil Minister Essam Al-Marzouk said at the
conference. The production cut will be reflected in Kuwait’s crude exports, he
said. Kuwait had agreed to cut 131,000 barrels a day in the global deal to
reduce output.


Total SA Chief Executive Officer Patrick Pouyanne, speaking at the same event,
said he expects that the decline in oil inventories will take two years.
Barkindo expressed confidence in the level of commitment from all countries
participating in the agreement to decrease supply. “I met with the Iraqi
minister this morning,” he said. “He has reassured me Iraq will implement its
part of the deal fully and on a timely basis.”


A committee of OPEC and non-OPEC producers responsible for monitoring
compliance with the cuts will hold its first meeting on Jan. 22 in Vienna,
Barkindo said. The committee, with Kuwait as chairman, also includes Algeria,
Venezuela, Russia and Oman.


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