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Saudi Arabia will ship one million bpd less crude oil to Asia next month in the latest sign that it is serious about shrinking the global oil glut, sources who spoke to Bloomberg said. One buyer in North Asia, the sources said, got an allocation 10 percent lower than what they’d asked for.
The news came after a string of estimates from consultancies that OPEC’s July oil output hit its highest point so far this year. The latest figures, from Platts, pegged the cartel’s production at 32.82 million bpd, thanks to higher output from Libya and Nigeria.
Last month, OPEC’s de-facto leader and largest producer pledged to cut overall August exports to 6.6 million bpd in a bid to compensate for declining compliance with last year’s production cut agreement aimed at boosting international prices. The figure represents a 600,000-bpd reduction from July shipments, and according to a Reuters source, would constitute the lowest monthly export level since this January.
Asia is a key market for every exporter of crude oil and so far, Saudi Arabia has spared it from cuts in order to hold onto its prized market share, which is already under threat from Russia, the U.S., and Iran. Riyadh must be in a very tight spot if it has had to resort to export cuts in Asia, but the move is in line with the Kingdom’s behavior since the signing of the production cut deal.
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Saudi Arabia has made clear on numerous occasions that it will do whatever it takes to push up international oil prices, and this now seems to include relinquishing market share in Asia. Separately, the Kingdom said it would pressure other OPEC members to improve their compliance rate with the deal, but there is still the question of Libya and Nigeria, both exempt from the cuts, which are ramping up their oil output at a respectable rate.
The reports of Saudi Arabia’s September export cuts pushed prices up slightly today, with WTI trading at US$49.54 and Brent at US$52.43 a barrel at 7:20 AM EDT.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.