Saudi Arabia has reduced oil production to less than 10 million barrels a day, below its targeted level, and will consider renewing its pledge to cut crude output in six months, Energy Minister Khalid Al-Falih said.
The world’s biggest oil exporter is currently producing at a 22-month low. It had agreed to cut 486,000 barrels a day to 10.058 million barrels a day as part of a global deal to reduce output to curb a supply glut. The caps on production, together with rising demand and natural decreases in output in some countries, will help balance the market and support prices, Al-Falih said in a speech at an energy conference in Abu Dhabi.
“Oil production now is below 10 million so far,” he told reporters later on Thursday. “So, we’re going the extra mile to lead our colleagues within and outside of OPEC to make sure that the market sees that there’s serious action in place.”
Kuwait has also exceeded its targeted cut, according to that country’s oil minister. Algeria’s energy minister said his nation too will reduce output by more than its quota.
Saudi Arabia is due to meet fellow members of the Organization of Petroleum Exporting Countries in May at their bi-annual meeting in Vienna to assess the market and the group’s production policy. OPEC states will also gather with major producers outside the group later this month in the Austrian capital to monitor their compliance with the production cuts, which aim at shoring up prices. Benchmark Brent crude was $1.00 higher at $56.10 a barrel in London at 3:03 p.m. local time.
“We have been moving toward a re-balanced market for some time — too slowly to my liking,” Al-Falih said. “The pace of re-balancing will be accelerated due to the recent agreements within OPEC and with our party from outside” the group. “We will consider renewing” the agreement after six months, he said. Saudi oil output was last below 10 million barrels a day in February 2015, according to data compiled by Bloomberg.
Al-Falih’s comments amplified remarks made earlier at the same event by OPEC Secretary-General Mohammad Barkindo, who said global oil inventories will start to fall by the second quarter of this year and that crude-producing countries will decide in May whether to extend their output cuts beyond the first half.
Global macroeconomic numbers have responded “positively” to the agreement between OPEC and non-OPEC producers to pare output, Barkindo said at the Atlantic Council Global Energy Forum. “We have our target in accelerating those draw-downs to bring them closer to the five-year level — that is our target,” he told reporters. OPEC isn’t targeting a specific price for crude, he said.
Total SA Chief Executive Officer Patrick Pouyanne, speaking at the same event, said he expects that the decline in oil inventories will take two years.
The cuts began on Jan. 1 and are to stay in effect though June. Oil markets should be in balance in six months, and it’s premature to decide whether additional cuts will be needed, United Arab Emirates Energy Minister Suhail Al Mazrouei said at the Abu Dhabi conference. Countries with a naturally declining output of oil are contributing to a decrease in global production, he said.
Kuwait has cut 133,000 barrels a day of oil output and is currently producing 2.7 million barrels a day, Oil Minister Essam Al-Marzouk said at the conference. The production cut will be reflected in Kuwait’s crude exports, he said. Kuwait had agreed to cut 131,000 barrels a day in the global deal to reduce output.
Algeria, which pledged to trim production by 50,000 barrels a day, has started cutting and will reduce its output in January by 60,000 barrels a day, Energy Minister Noureddine Boutarfa said in an interview in Abu Dhabi. It may cut as much as 65,000, he said.
OPEC’s Barkindo expressed confidence in the level of commitment from all countries participating in the agreement to decrease supply. “I met with the Iraqi minister this morning,” he said. “He has reassured me Iraq will implement its part of the deal fully and on a timely basis.”
Global oil inventories will decline this year by 700,000 barrels a day even if Iraq, which initially sought an exemption from OPEC’s output cut, fails to comply, according to London-based consultant Energy Aspects Ltd.
OPEC is likely to achieve 80 percent compliance with its promised reduction, a level “higher than the not-so-shabby historical average of 66 percent” the group achieved in deals since the early 1980s, Energy Aspects said in an e-mailed report. The market, however, is “dubious of any compliance at all,” it said.
A committee of OPEC and non-OPEC producers responsible for monitoring compliance with the cuts will hold its first meeting on Jan. 22 in Vienna, Barkindo said. The committee, with Kuwait as chairman, also includes Algeria, Venezuela, Russia and Oman.