Saudi Arabia’s Crown Prince Mohammed has discussed the restart of crude oil production in the neutral zone between Saudi Arabia and Kuwait during a meeting with Kuwait’s Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, Reuters reported ahead of the Sunday visit, quoting sources in the know, who declined to be named.
Prince Mohammed was accompanied by Energy Minister Khalid al-Falih, the sources also said.
Joint oil production in the neutral zone was suspended in 2015, but earlier this month the Financial Times reported that the two countries were mulling over a restart amid rising oil prices and the matching rise in worry among large oil buyers.
The neutral zone, the FT reported at the time, could be pumping half a million barrels daily in a few months, according to the International Energy Agency, which would add to more than 10 million bpd of Saudi production and almost 3 million bpd on Kuwaiti production based on the latest figures for July.
The talks on the production restart come despite earlier statements from Al-Falih that Saudi Arabia does not see the need for higher output: according to the minister, the market was near balance, despite the rising benchmarks and the upcoming sanctions against Iran. Now, it seems, the world’s top exporter of oil has had a change of heart.
Saudi Arabia is considered to be the oil producer with the most spare capacity among OPEC members, with the Energy Information Administration calculating it at between 1.5 and 2 million bpd. Some industry observers, however, have questioned the figures, which are defined as the amount of daily production that can be launched within 30 days and sustained for at least 90 days, according to EIA.
With Venezuela’s production falling consistently and the Iran sanctions as well as Iraq’s difficulties in boosting its oil production, OPEC’s total spare capacity is now estimated to be just 1.49 million bpd this quarter, according to a different estimate. This certainly raises the question whether the cartel can boost production enough to rein in the price rise ahead of the sanctions or within days of their entry into force.
By Irina Slav for Oilprice.com
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