This summary is from reports that are available to subscribers of Stratas Advisors’ Global Energy Perspectives service.
Saudi Arabia said it will cut crude oil exports in November by 560,000 barrels per day (bbl/d) as the country makes good on its pledge to help rein in a global supply glut, an oil ministry spokesman said Oct. 9.
The cut is in line with the kingdom’s commitment to an OPEC-led supply reduction under which Riyadh is required to slash 486,000 bbl/d.
“Despite very strong demand from international waterborne customers at more than 7.711 million bpd, they were allocated only 7.150 million bpd," the spokesman said in a statement.
The kingdom is “restraining not only the top line of production volume but even more importantly the bottom line of exports, which are what ultimately shape global inventories and market balances,” the spokesman added.
The planned November cut, according to Stratas Advisors, represents a seasonal decline in commitments combined and the Saudi’s desire to give the market what it wants—higher crude prices.
Export cuts have been a fundamental desire of oil traders, and the ability to drive high credibility heading into the Nov. 30 OPEC meeting is crucial to getting buy-in from OPEC members for a deal extension and to support crude prices moving forward, Stratas Advisors noted. As usual, Saudi Arabia’s comments represent both meaningful efforts to rebalance the physical oil market and rhetoric designed to ensure that traders keep the price supported into 2018.
OPEC, along with Russia and other non-member oil producers, agreed to cut output by about 1.8 MMbbl/d from Jan. 1 this year until March 2018. On Oct. 4, Russian President Vladimir Putin went a step further as he suggested that the production cuts should be extended until the end of 2018.
Saudi Arabia has been slashing shipments in recent months, particularly to the U.S., in an attempt to drain global oil stocks.
The kingdom curtailed its oil exports in September to below 6.7 MMbbl/d “despite high customer demand and the partial reduction of domestic summer crude-burning requirements,” the OPEC spokesman said.
“The kingdom expects all other participants in the (agreement) to follow suit and to maintain the high levels of overall conformity achieved in August going forward,” he added.
OPEC and other producing countries delivered 116% of their pledged output cuts in August, Reuters reported.
Meanwhile, OPEC’s secretary general said Oct. 9 said that the oil market is rebalancing fast and has almost entirely erased the glut of refined products.
Mohammad Barkindo, the secretary general, said growth in US shale oil output had slowed compared to the first half of 2017 and that growth in global demand may show further upward revisions, giving the supply-cut effort tailwind.
“There is clear evidence that the market is rebalancing,” Barkindo said. “The process of global destocking continues, both onshore and offshore with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions.”
Reuters news reports were sourced in this story.
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