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Oil Rises as Saudi Arabia Pledges Deep Cut to August Exports

These translations are done via Google Translate

July 24, 2017


Oil rose as Saudi Arabia said it would make deep cuts to its crude exports in August and encourage better compliance with supply reductions from other producers.

Futures rose as much as 1.2 percent in New York. Saudi Arabia, OPEC’s largest producer, will limit exports to 6.6 million barrels a day in August, 1 million lower than year earlier, Minister of Energy and Industry Khalid Al-Falih said after a meeting with fellow producers. Exports are the key metric for financial markets and a technical committee that monitors compliance with output cuts will now also study data on exports, he added.

Oil remains in a bear market amid concern that rising global output will offset the production curbs by members of the Organization of Petroleum Exporting Countries and its allies, including Russia. The group is likely to become less compliant with its cuts toward the end of this year, with the risk of a domino effect after some members suggested they won’t adhere to their targets, according to JPMorgan Chase & Co.

“It would make a lot of sense to monitor exports instead of or in addition to production,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. Monitoring exports would make the process “more trustworthy and transparent.”

West Texas Intermediate for September delivery was at $46.16 a barrel on the New York Mercantile Exchange, up 0.9 percent, at 8:53 a.m. local time. Total volume traded was about 36 percent above the 100-day average.

See also: Oil Bulls Snap Out of Funk But OPEC Doubts Still Loom Large

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Brent for September settlement was 45 cents higher at $48.51 a barrel on the London-based ICE Futures Europe exchange. Prices lost 1.7 percent last week. The global benchmark crude traded at a premium of $2.35 to WTI.

The deal that OPEC and its allies including Russia have implemented since January 1 focused on production cuts rather than export cuts. On Monday in St. Petersburg, OPEC Secretary-General Mohammad Barkindo said OPEC was in agreement to study “ other parameters.”

“From the market’s point of view, the only thing they care about is exports,” Amrita Sen, chief oil analyst at Energy Aspects said. The focus on exports will be “positive” for the oil market balances, she said.

Libya is allowed to keep increasing production and has plans to raise output as high as 1.25 million barrels a day, Al-Falih told reporters in St. Petersburg on Monday. Nigeria is ready to cap or even reduce its supply if it can maintain output of 1.8 million barrels a day, according to people familiar with the matter. Both countries are exempted from OPEC’s cuts agreement due to internal strife that hindered the recovery of their crude production.

Oil-market news:

OPEC may need to discuss in November extending the oil output cuts, the United Arab Emirates energy minister Suhail Al Mazrouei said. Market re-balancing is on track and is set to accelerate in the second half of the year, OPEC Barkindo said. U.S. drillers trimmed the rig count last week by 1 to 764, the first drop in three weeks, according to Baker Hughes data Friday. Nigeria signaled earlier this month that it would cap production when it can maintain stable production of 1.8 million barrels a day.

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