Saudi Arabia has cut oil output to its lowest level in two years, reaching below 10 million barrels per day, Saudi Energy Minister Khalid al-Falih said on Thursday, jump-starting markets that have been jittery over whether OPEC countries will cheat on their output cut commitments.
Saudi Arabia’s 10-million-barrel per day output is a more ambitious cut than it had promised as a part of this deal, and represents a 22-month low. Al-Falih also said they planned to make deeper cuts next month. Such levels haven’t been seen since February 2015.
According to OPEC’s 30 November output cut agreement, Saudi Arabia agreed to cut 486,000 barrels a day to 10.058 million barrels.
“Oil production now is below 10 million so far,” Khalid told reporters on Thursday. “So, we’re going the extra mile to lead our colleagues within and outside of OPEC to make sure that the market sees that there’s serious action in place”.
OPEC has a notoriously poor track record at sticking to output cut promises, so the market has been volatile. Goldman Sachs, however, said earlier this month said it anticipated compliance to be at 84 percent.
Likewise, Energy Aspects oil analyst Virendra Chauhan told CNBC that he expected compliance at 80 percent, and that Russia would stand by its promised cut. Related: Blockbuster Oil Deal In Argentina Could Trigger Drilling Boom
Alex Dryden, global market strategist at JP Morgan, also sees compliance at around 80 percent, he has told CNBC.
The Saudi news on Thursday that it has cut even more than it pledged will likely boost markets.
Mid-day trading saw West Texas Intermediate (WTI) up 1.55 percent at US$53.06, and Brent Crude up 1.83 percent at US$56.11.
"I am confident that the combination of capping production by 25 countries and growth of demand will continue to balance and prices will respond accordingly," Al-Falih said.
By Damir Kaletovic for Oilprice.com
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