TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Saudi Arabia, OPEC resilience put to test
Saudi cuts come at a time when the world is feeling the pinch of medium and heavy sour crude volumes lost from Venezuelan and Iranian sanctions.
Change Size
An oil tanker is seen at the Jose refinery cargo terminal in Venezuela. Oil rose to around US$67 a barrel on Tuesday, supported by Saudi Arabia’s plan for further voluntary supply curbs in April and a cut in oil exports from Venezuela due to a power outage.
(Reuters/Jorge Silva)
S
audi Arabia and its Organization of Petroleum Exporting Countries (OPEC) allies face a test of their resilience when they meet next month. On the one hand, restricting output has boosted prices, but on the other hand their strategy has stoked production outside the group. The kingdom’s insistence on rigid output discipline isn’t without risk in Asia.
Riyadh has so far maintained its market share in the region, despite its self-enforced production cuts. For instance, supplies to China in January rose 34 percent year on year to 1.4 million barrel per day (bpd), official government data showed.
But, an open arbitrage to Asia for the United States, North Sea and West African crudes, and the possibility of global demand growth picking up momentum increasingly threatens the kingdom’s carefully crafted strategy.
For now, Saudi is sticking to its game plan. The kingdom cut output to 10.15 million bpd in February, according to an S&P Global Platts survey.
That was 160,000 bpd below its quota of 10.31 million bpd and the lowest level since May 2018. Energy Minister Khalid al-Falih has warned output could go lower in March, to 9.8 million bpd.
He has good reason talk tough. Riyadh’s economic strategy is centered on higher spending. In order to have any hope of balancing its books, analysts say it needs oil prices above US$84 per barrel for the entire year, at the very least.
Saudi cuts come at a time when the world is feeling the pinch of medium and heavy sour crude volumes lost from Venezuelan and Iranian sanctions.
