Saudi Arabia Cut Output in August as Oil Price Drops
The biggest Saudi exporter informed OPEC it reduced its oil output in August by 400,000 barrels per day (bpd), a decrease which coincides with a drop in oil prices towards the kingdom’s preferred level of $100 a barrel.
In a report issued last Wednesday, the OPEC members said Saudi Arabia reported a production of 9.597 million bpd for the month of August, less than in July. A steady drop in oil prices, which for Brent crude fell below $100 on Monday for the first time in 14 months, has raised the question of whether Saudi Arabia, holder of the world’s largest spare output capacity, will curb its output.
While Saudi has reported lower production in August, it does not necessarily mean lower exports. Analysts explain Saudi production often slows down when domestic demand for air conditioning decreases from its summer peak. “I think we can be pretty sure the Saudis are cutting,” said Samuel Ciszuk, analyst at the Swedish energy agency. “But maybe the crude burning has come down a bit and I’m sceptical that they have reduced exports by as much as 400,000 bpd.”
OPEC has not voiced concern about the price drop, judging it to be temporary. Kuwait’s OPEC governor said on Wednesday she expected prices to rise again and maintain the $100-a-barrel level. They also publishes production figures from secondary sources. These figures say 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 Libya’s comeback and higher Angolan exports.
OPEC now expects oil demand to rise this year by 1.05 million bpd, down 50,000 bpd from the earlier estimates. Demand will grow somewhat faster in 2015, but OPEC sliced the estimate by 20,000 bpd.
Increasing production outside OPEC, in particular the US, due to its shale energy boom, has put OPEC’s market share under pressure.