Saudi Arabia pumped a daily average of 10.63 million barrels of crude in August, a 400,000 bpd decline on peak production in July, prompted by seasonally high demand. Exports in August were also lower, at 7.31 million barrels, down 310,000 barrels from July, according to information supplied by Riyadh to the Joint Organizations Data Initiative.
Oil inventories in the kingdom fell to 281 million barrels in August, a 460,000-barrel drop from July. Refineries in Saudi Arabia processed 2.6 million bpd in the reported month, down from 2.61 million bpd in July.
The data may indicate that Saudi Arabia is indeed serious about its plans to reduce its oil production in a bid to rebalance markets. These plans reflect Riyadh’s realization that the price war it started two years ago with America’s shale boomers has not done it much good.
In fact, low oil prices have demonstrated that Saudi Arabia’s existing economic model, heavily reliant on oil revenues for public spending, is unsustainable, especially with Iran back on the international oil scene, pushing for a rise in its own oil production to pre-sanction levels before it agrees to any freezes or cuts. The kingdom’s determination to keep its market share at all costs has, apparently, backfired.
In addition to the Saudis agreeing to cut their crude output if Iran joins the freeze talks, Riyadh has also offered its first international bond placement. Government officials are currently doing a road show for the bond, which started in London and will pass through Los Angeles, Boston, and end in New York.
According to people who attended the investor event in London, as cited by Bloomberg, the Saudi officials were reluctant to talk about oil. "The fact that they refused to take questions on oil prices or how much is achievable on budget rationalization have left investors with half a picture," said Gregory Saichin, Alianz Global Investors’ chief investment officer for emerging-market bonds.
Saudi Arabia eyes proceeds from the bonds of US$10 billion, after collecting some US$63 billion from local bond sales, as the worst budget deficit in 20 years has started to bite deeply into its foreign exchange reserves. The country seems to have no other useful move besides curbing production and making sure the rest of OPEC does the same.
By Irina Slav for Oilprice.com
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