Saudi Arabia cuts oil production as demand eases

13 Jan

Saudi Arabia oil productionReuters reported that Saudi Arabia has cut oil production substantially, moving to fend off a growing overhang in world oil supply and defend prices well above USD 100 a barrel.

Familiar with Saudi policy said that in the last two months of 2012, OPEC’s lead producer responded to slower demand by lowering supply by around 700,000 barrels per day, with output in December falling to around 9 million barrels per day.

That’s more than a million barrels daily below peak production last summer. Market sources say the world’s largest exporter may need to drop below the 9 million bpd mark for the first time since May 2011 as rising supply elsewhere outpaces demand.

An OPEC source said that core Gulf OPEC producers Kuwait and the United Arab Emirates have shown no inclination to lower supplies.

News of the Saudi supply curbs helped push Brent up more than dollar to over USD 113 a barrel, comfortably above the USD 100 Riyadh says it favors.

Major customers of state oil company Saudi Aramco said that the cuts were driven by lower demand.

A major customer of state oil giant Saudi Aramco said that “It’s nothing sinister. The call on Saudi Arabia’s crude is much less and they are responding to that. Whatever we ask for, we get Aramco is not making the cuts.”

The world’s largest oil exporter produced 9.025 million barrel per day in December, down from 9.49 million barrel per day in November and 9.72 million in October and over 10 million barrel per day earlier in the year.

Mr Paul Tossetti, senior energy adviser at consulting firm PFC Energy said that “I think the cut relates to lower domestic consumption and lower demand from overseas customers.”

Source – Reuters

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