Baku, Azerbaijan, Feb.22
By Leman Zeynalova – Trend:
Saudi Arabia still holds a good hand in the oil market, Trend reports citing an analysis by the UK-based Capital Economics consulting company.
“Indeed, we are of the view that Saudi Arabia remains influential for two key reasons.
“First, the country may now only be the world’s third largest producer, but it remains the world’s largest exporter. Capacity to export is a much bigger driver of global oil prices than production. And net-imports still account for about 20% of US crude consumption.
Second, the Kingdom has the largest spare production capacity in the world. The scale of the spare capacity is much debated, but no other producer can claim to be able to significantly raise output within a short time,” said the company.
Admittedly, US shale producers may be starting to challenge this strength given that they can bring supply on much more quickly than producers of conventional oil, according to Capital Economics.
“But there may still be logistical difficulties exporting US oil and the type of light oil may be a problem for many buyers. Indeed, Saudi Arabia’s ability to influence the oil market is clearly evident in the latest round of OPEC cuts. The Kingdom cut supply by more than is warranted by the new quotas and has pledged to reduce output even further in March,” reads the analysis.
Obviously, the involuntary cuts by Iran and Venezuela are also playing a role in reducing supply, but they had been anticipated and already priced into markets, according to the consulting company.
Saudi Arabia has undertaken the largest cut in oil output among the participants of the OPEC deal signed in 2016 in Vienna.
OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.
OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.
The 5th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria, on December 7, 2018.
The meeting participants decided to adjust the overall production by 1.2 million barrels per day, effective as of January 2019 for an initial period of six months. The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the ‘Declaration of Cooperation’ will correspond to 0.8 million barrels per day (2.5 percent), and 0.4 million barrels per day (2 percent), respectively.
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