Why Saudis cutting more oil than pledged to OPEC?

Baku, Azerbaijan, Sept.2

By Leman Zeynalova – Trend:

Saudi Arabia wants to have a stable market situation, not only for higher price levels but also for the upcoming Aramco IPO issue, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

OPEC has pumped 29.61 million barrels per day in August, the survey showed, up 80,000 bpd from July’s revised figure. This is due to the increasing supply from Iraq and Nigeria. Saudi Arabia remains the only country sacrificing more than it had pledged although it lifted production in August to produce 9.63 million barrels per day.

“Demand for oil is still up, so no chance there is no a market for extra production.

Even that there is global trade war between US-China, which is depressing overall bullishness of the market, still, lower oil prices are attractive for customers, as this is the right time to get more for less,” noted the expert.

He pointed out that overall demand in Asia is up too, while there is still a major growth in Africa-MENA available too. “Keep in mind it is summer season still, so demand is up when it is hot in several major regions.”

There is no real coincidence in this market, OPEC’s compliance is still very high, mainly due to Saudi Arabia-UAE, but of course Iran-Venezuela is also a major factor in the latter, Widdershoven believes.

“At same time, there is a growing demand for the oil crude qualities of the Arab world, and Nigeria, as Iranian and Venezuelan crudes are taken out of market. Refineries need the products from Iraq, and Nigeria’s middle-heavy crudes too. Saudi Arabia has committed itself to the latter, so it will try to keep stability in the market. The Kingdom also needs to show that it is the leader, as it wants to have a stable market situation, not only for higher price levels but also for the upcoming Aramco IPO issue. The latter needs higher price levels but also a strong Saudi policy, and a stable market environment,” he said.

The expert said some are arguing that OPEC wants to end its cuts, and will flood the market.

“This is however not a real option, as most producers will need more investments, which are not to be found at lower price levels. At same time, markets are expecting a shortage in the market still at end of 2019, so more extra oil, which is not blocking OPEC strategy, is no real issue.”

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Follow the author on Twitter:@Lyaman_Zeyn

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