Amid confusing discrepant production, export figures. and baselines for OPEC's cut deal, the cartel's de facto leader and biggest producer and exporter Saudi Arabia is signaling that the important metric in keeping with the agreement is the supply that goes to the market-domestically and for exports.
"What we are watching closely is the supply. Saudi Arabia will not supply the market more than 10 million bpd," a Saudi-based industry source has told Reuters.
OPEC's agreement, effective January 1, is based on production figures and planned adjustments in production to reduce collective output by around 1.2 million bpd to bring it to a ceiling of 32.5 million bpd.
Saudi Arabia told OPEC that its February production was 10.011 million bpd, up from 9.748 million bpd in January, but still below the 10.058 million bpd ceiling in the deal.
Along with this direct communication to OPEC, the Saudis often communicate another figure to the market - a supply figure leaked to journalists by industry sources. In January, Saudi Arabia said it supplied 9.99 million bpd to the market, more than the output it had reported-meaning that it had drawn from oil storage. In February, the Saudi supply was 9.90 million bpd, below the production figure, so they should have put oil into storage, according to Reuters.
Since the start of the deal, the market and industry analysts and observers have been focused on the production figures to gauge the compliance of the single members and the group as a whole. Production numbers showed that compliance was very high in the first two months of the year, at more than 90 percent, although several producers were still above the production ceilings they had signed up to in the deal. Exports have also been closely watched, although they can differ in trends from production.
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Iraq - which had contested OPEC's secondary sources estimates for production before agreeing to sign the output cut deal - has recently suggested that the agreement implied that exports, rather than production, was the understood baseline for the cuts.
Nonetheless, production is what is being used to measure compliance, and the group is boasting a phenomenally high rate so far. But some analysts suggest that it's exports that really matter in the quest to clear the global glut.
The Saudi exports have more modestly dropped than their production over the past year, due in part to lower rates of crude oil use in winter because the Kingdom is trying to use more natural gas for power generation, Olivier Jakob at Petromatrix consultancy told Reuters.
"With a low level of reduction in Saudi crude oil exports versus a year ago and the increase from Iran, the Gulf region was exporting about 250,000 bpd more crude oil than a year ago. This has not allowed much of a rebalancing in the first quarter," Jakob noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More