Saudi Arabia’s Oil Minister Khalid al-Falih has tried to reassure markets of The Kingdom’s commitment to the rebalancing of crude oil’s fundamentals, after benchmarks yesterday slid down on an announcement that Saudi Arabia had increase production in February to 10.01 million bpd.
The Kingdom, al-Falih said,”is committed and determined to stabilize the global oil market by working closely with all other participating OPEC and non-OPEC producers.” Al-Falih then went on to explain that the self-reported level of production does not necessarily reflect the actual amount supplied to the market.
It was Saudi Arabia’s self-reported figure for February that pressured prices, with WTI diving to $47.72 in midday trading, and Brent touching the psychologically significant $50 barrier, at $50.78 a barrel. Secondary sources, which OPEC uses to calculate each member’s monthly production, pegged the Saudi output at 9.797 million barrels daily.
The 10.01 million bpd are still below Saudi Arabia’s self-imposed quota of 10.058 million barrels daily under the OPEC agreement, but they are 263,300 bpd more than the country’s January output—a fact that is not lost on the already excessively volatile market. Related: An OPEC Deal Extension Won’t Affect Oil Prices
On the flip side, OPEC’s secondary sources estimated that the overall February output of the cartel had shrunk by 139,000 bpd to 31.96 million bpd, despite a build in Nigerian production and Iraq’s failure or unwillingness to cut as agreed to 4.351 million bpd. OPEC’s second-biggest producer pumped 4.414 million bpd last month.
Al-Falih explained the figure as follows: “The difference between what the market observes as production, and the actual supply levels in any given month, is due to operational factors that are influenced by storage adjustments and other month to month variables.”
Yet, the increase could be seen as a hint from the Saudis that they no longer wish to shoulder more than their fair share of the production cut, especially as the cut seems to be failing to achieve its goal, thanks to growing production outside OPEC.
By Irina Slav for Oilprice.com
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