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Saudis Keeping Oil Exports Down To Combat Falling Prices

Despite healthy demand in all regions, the world’s top crude oil exporter Saudi Arabia continues to keep its exports below the 7-million-bpd mark and will do so at least through September as it aims to tighten the market and drain down the oversupply, a Saudi official told Reuters on Thursday.

OPEC’s largest producer Saudi Arabia has kept its crude oil exports at below 7 million bpd for several months now, signaling in July that its July and August exports would continue to be lower than 7 million bpd, to “avoid excess stock building, particularly in oversupplied markets.”

For August and September, the Saudis will continue to restrain crude exports, hoping to drain the glut and lift oil prices that have taken a beating over the past week due to intensified concerns about global oil demand growth amid trade and currency wars.  

“Demand was universally stronger, in all regions. But we kept exports below 7 million bpd,” the Saudi official told Reuters, commenting on Saudi Arabia’s strategy to tighten the market. Despite what the Saudis see as strong demand from all oil-consuming regions, they will continue to pump below 10 million bpd and export below 7 million bpd of Saudi oil, the official said. Related: Something Very Unusual Just Happened In Russian Oil & Gas

Deeper production cuts at Saudi Arabia, together with lower output at sanctions-hit Iran, and outages in Libya and Venezuela sent OPEC’s crude oil production in July falling to its lowest level since 2011, the monthly Reuters survey showed last week. The Saudis pumped 9.65 million bpd in July, after OPEC and its allies extended the production cuts into 2020 at the beginning of the month, according to the Reuters survey.

The Saudi efforts to tighten the market, however, have been hampered by weakening demand growth and the U.S. shale production growth.

In addition, the U.S.-China trade war and a looming currency war rattled oil markets in the past week, and prices dropped on Wednesday to their lowest levels since January this year. In view of the sliding oil prices, Saudi Arabia has contacted other oil producers to discuss a potential oil strategy response to the slumping price of oil, a Saudi official told Bloomberg on Thursday.  

By Tsvetana Paraskova for Oilprice.com

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Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.  More

Comments

  • Igobeli Wosfalisaba - 8th Aug 2019 at 1:06pm:
    The cost of producing keep rising every day, from tanker insurance rates to water to inject into the ground and the hard working oil workers who have to put food on the table. Here in Nigeria we buy all are supplies from China, they have a hard working labor force not burdened with out of control government spending. Good day to you sir.
  • Mamdouh Salameh - 8th Aug 2019 at 1:58pm:
    There is no doubt that since the implementation of the OPEC+ production cut agreement, Saudi Arabia has gone beyond the call of duty and cut its production far above its share in the cuts and kept its oil exports below 7 million barrels a day (mbd) in an attempt to absorb the glut and tighten the oil market.

    Whilst production cuts can in normal circumstances help absorb the glut particularly when the fundamentals of the global economy are positive, they are useless against a raging trade war.

    Saudi Arabia-led OPEC and the global oil market are facing a crisis not of their own making. The problem is the escalating trade war between the US and China which is depressing global oil demand and oil prices and also augmenting an already existing glut in the market.

    Only an end to the trade war could invigorate the global economy, stimulate the global demand for oil, absorb the glut in the market and push oil prices upwards.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
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