Saudi Arabia’s stance on oil output to have major impact on prices
Baku, Azerbaijan, Oct.29
By Leman Zeynalova – Trend:
Saudi Arabia’s stance on oil output will have a major impact on prices, Emma Richards, oil and gas analyst with BMI Research told Trend, commenting on the possibility of the Kingdom’s increasing its production further.
“It’s very possible, but increasing their production to 12 million barrels per day would mean there was almost no spare capacity left in the market. It also costs money and takes time to bring that additional supply online, so it’s not a decision Saudi Arabia would take lightly,” said the expert.
She said BMI Research expects the country’s production will rise over 11 million barrels per day in the fourth quarter, but there’s a lot of uncertainty heading into 2019.
“Increased production from Saudi Arabia will be necessary to offset the losses from Iran and prevent prices from spiking upwards. Outside the kingdom there’s very little flexible supply globally, so the stance they take on production will have a very major impact on prices,” said the analyst.
Richards said she thinks it’s unlikely that the US will impose very punitive measures on Saudi Arabia.
“If they did, we would probably see a risk premium priced into Brent, with concerns that Saudi Arabia would use its oil to retaliate. It’s very difficult to imagine the Saudi government using its oil in that way, but markets have a tendency to overreact to these low probability, high impact type events,” added the expert.
Saudi Arabia’s Energy Minister Khalid A. Al-Falih earlier said that the country’s daily oil output for October stands at 10.7 million barrels. He noted that in the case of necessity, this figure can reach 12 million barrels per day.
The minister pointed out that the uncertainty with regard to world oil supply still continues. The sanctions to be imposed on Iran starting from Nov.4 and the supply cuts from some other countries also contribute to this uncertainly, according to Al-Falih. Therefore, the minister believes it is not ruled out that oil prices can surpass $100 per barrel in 2019.
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