Saudi to cut oil supply below OPEC targets
COMMENT: Ironic juxtaposition this - in this news item today I think we're all expected to nod in approval that OPEC is attempting to "balance the market" for oil. In the other news item we're expected to nod approvingly that Russia has reopened the gas taps to Europe.
Here we have these big oil and gas producers levering their production of fuels for national advantage. Not so Canada. The difference? Something to do with nationalized oil production? Just askin'
MAYANK BHARDWAJ
Reuters
Globe and Mail
January 13, 2009
NEW DELHI Saudi Arabia plans to go beyond OPEC's deepest ever single cut in supply as the world's top oil exporter looks to halt a slide that has lopped over $110 (U.S.) off the oil price since July.
The kingdom will pump below its OPEC target in February at its lowest level in over six years and is prepared to go further still to balance a market battered by falling demand and a global recession, Oil Minister Ali al-Naimi told reporters on Tuesday.
We will do what it takes to bring it back to balance, he said on arrival in India for an energy conference.
The Saudi supply target was 8.05 million barrels per day (bpd), a little under 10 per cent of global output, after the Organization of the Petroleum Exporting Countries (OPEC) agreed to its biggest ever cut in December.
It will be lower, Mr. Naimi said of February output. The kingdom was currently pumping around 8 million bpd, he added.
Strict Saudi discipline has so far failed to boost oil prices, which were below $37 a barrel on Tuesday, less than half the $75 price which Saudi King Abdullah has named as fair.
Mr. Naimi declined to comment on whether the move was taken in anticipation of a further cut in output by OPEC.
Industry sources on Sunday told Reuters that Saudi planned to cut by up to 300,000 bpd below its OPEC target in February, a pro-active step to balance the oil market. The reduction would take Saudi output to around 7.7 million bpd, some 2 million bpd below its pledged output in July.
Then, the kingdom was the only OPEC country with significant spare capacity to boost output as the price soared to its peak above $147 a barrel. The kingdom has shouldered most of OPEC's production cuts as the oil price has collapsed and producers have raced to bring supply in line with demand to stop brimming global stocks rising further.
Falling consumption in top consumer the United States and other developed economies threatens to shrink global oil demand this year for the first time since 1983.
Saudi Arabia last pumped below 8 million bpd in October 2002, according to U.S. Department of Energy data. Production of 7.7 million bpd would be the lowest since July 2002.
OPEC, which pumps around a third of the world's oil, is scheduled to meet again in March. The decline in demand due to a slowing economy is likely to be exaggerated by then as warmer weather in the northern hemisphere cuts oil consumption for heating.
Some in the group have called for a meeting before that, while others say waiting until March would allow OPEC to better measure the effect on the market of total pledged cuts of 4.2 million bpd since September.
Even before the 12-member exporter group announced its record cut of 2.2 million bpd in December, Saudi Arabia had informed its customers they would receive less oil. That latest cut came into effect on Jan. 1.