Saudi Arabia maintains oil cuts compliance after mixed figures released

15 March 2017

Several other Opec members missed supply reduction targets

Saudi Arabia told Opec that it had increased production in February after a sharp reduction in January but remained below the supply level agreed with other Opec and non-Opec producers.

Opec reported, based on direct communication that the kingdom added 263,000 barrels day (b/d) in February to 10.01 million b/d. The figure based on secondary sources showed a reduction of 68,100 b/d to 9.8 million b/d.

Both estimates saw Saudi Arabia producing fewer barrels than the agreed 10.58 million b/d.

In an unusual move, the Saudi Energy, Industry and Mineral Resources Ministry released a statement assuring the market that it is committed to meeting its obligations under the production cuts deal agreed on 30 November.

“Saudi Arabia assures the market that it is committed and determined to stabilising the global oil market by working closely with other participating Opec and non-Opec members,” said the statement.

The minstry said that Saudi Arabia’s crude supply to the market was 9.90 million b/d in February against 9.99 million b/d in January, representing a 90,000 b/d month-on-month decline.

“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-on-month variables,” the ministry added.

Saudi Arabia, which bears the brunt of responsibility for the Opec cuts being by far its largest producer, was one of the few Middle East producers to meet its target in either January or February.

Riyadh will be the driving force behind any negotiations to extend the production cuts into the second half of 2017 but Energy Minister Khalid al-Falih said in Houston last week that there would be no “free rides” for producers benefiting from lower Saudi supply.

The Opec estimates for February based on secondary sources show that all members reduced output with the exception of Nigeria and Iran, which are permitted under the agreement. Opec production dropped by 139,500 b/d to 31.958 million b/d in February from the previous month.

Kuwait was seen to be just 2,000 b/d above the agreed ceiling but the UAE missed its maximum production target by 51,000 b/d. Algeria, Iraq and Qatar were also producing at above agreed levels, according to the Opec secondary source figures.

The price of Brent is trading about 10 per cent lower than its peak earlier this year. Brent had stabilised in a range of $54-58 a barrel in the months since early December but dropped last week as US storage data came in higher than expected, indicating that oversupply had not been curtailed.

Brent closed at $50.92 on 14 March after the Opec report was released.

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