Saudi Arabia can boost oil output again
Baku, Azerbaijan, Nov.3
By Leman Zeynalova – Trend:
Saudi Arabia will renew its focus on increasing production by H2 2017, as it moves away from traditional markets such as the US to prioritize rising demand from Asia, according the report of the US JP Morgan bank.
“We believe it will seek to be at the front of the queue to fill a potential global supply deficit of up to 1.5 million barrels per day (largely emerging from the depletion of non-OPEC supply) by increasing production towards 12 million barrels per day,” said the report obtained by Trend Nov.3.
JP Morgan analysts believe that OPEC’s oil policy will ultimately be driven by ‘war of pain thresholds' between Iran and Saudi Arabia.
“Iran's higher gearing to oil and lower breakeven suggests that it has more to gain from higher oil in relative terms than Saudi Arabia,” said the report.
Fiscal, geopolitical and market share are key drivers of Saudi Arabia’s oil agenda and $40-60 per barrel offers a ‘happy medium’ to balance them, according to JP Morgan.
The report said that any future OPEC deal is conditional on: 1) the relationship between Saudi and Iran: as Syria continues to be volatile and the war with Yemen lingers, geopolitics may once again trump economic rationale; 2) Saudi Arabia’s fiscal balance: as the deficit improves in 2017/18, the likelihood that Saudi Arabia steps away from production quotas is high, as it moves back into a position of fiscal strength, triggering a renewed emphasis on market share.
In September, OPEC producers agreed during the informal meeting to cut down the oil output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd.
How much each country will produce is to be decided at the next formal meeting of OPEC in November.