Opinion

Saudi Arabia leads by example in making voluntary output cuts

Saudi Arabia leads by example in making voluntary output cuts

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The additional measures undertaken by Saudi Arabia to further cut output by 1 million barrels per day (bpd) next month will help to stabilize the market balance between supply and demand.

This is not about boosting prices, which have been moving in a narrow range of around $30 per barrel for Brent crude oil for the second week in a row.

Accordingly, Saudi Arabia will produce 7.49 million bpd of crude oil in June, which is one million bpd below its agreed OPEC+ quota. 

This is about 4.8 million bpd lower than the record for Saudi crude oil production set in April when it reached 12.3 million bpd.

Under the OPEC+ agreement, Saudi Arabia’s original output ceiling was 8.49 million bpd for May and June, and 8.99 million bpd for the rest of the year. So why the need for this voluntary output cut just as demand is starting to pick up following the easing of coronavirus-related lockdowns?

The move came despite signs of improving global oil demand, but was nonetheless necessary to accelerate absorbing the global oil surplus and in order to help global refiner’s logistics. This will effectively give them more room in their tanks to process new cargoes of crude oil.

As Saudi Energy Minister Prince Abdul Aziz bin Salman highlighted, the Kingdom wants to be ahead of the curve by expediting the rebalancing of the market.

This move may encourage other producers inside and outside OPEC+ to collaborate in similar ways to help normalize the market.

While some analysts may question whether this alone is enough to rebalance the market, it will at the very least help to reduce pressure within the storage space and buy time to wait for a demand rebound.

It also reinforces Saudi Arabia’s role as the world’s only swing producer that was able to reduce oil output from a record 12.3 million bpd to just 7.49 million bpd in the space of two months. No other producer could manage that and it reflects the still unparalleled infrastructure of Saudi Aramco.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

Saudi Cabinet urges OPEC+ countries to further reduce oil production

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King Salman briefed ministers on his recent telephone conversation with US President Donald Trump. (SPA)
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King Salman briefed ministers on his recent telephone conversation with US President Donald Trump. (SPA)
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Updated 13 May 2020

Saudi Cabinet urges OPEC+ countries to further reduce oil production

  • The cabinet said the Saudi initiatives aim to encourage other countries
  • Ministers were then updated on the latest developments in the corona virus crisis

RIYADH: Saudi Arabia’s cabinet on Tuesday urged oil-producing nations not only to adhere to agreed cuts to production, but further reduce output to help restore balance in global oil markets, state news agency SPA reported.

In issuing the call to OPEC+, which includes members of the Organization of the Petroleum Exporting Countries plus Russia and other nations, ministers said the Kingdom is committed to supporting the stability of global oil markets.

After the meeting, acting Minister of Media Majed Al-Qasabi said that in addition to its commitment to the OPEC+ agreement, the Kingdom will voluntarily reduce output by an additional 1 million barrels a day in June. It will also try to implement additional cuts this month, with the consent of its customers, he added.

The cabinet said the Saudi initiatives aim to encourage other countries, whether they have signed up to the OPEC+ agreement or not, to adhere to its reduced rates and to cut output even further to help stabilize global oil markets.

During the cabinet meeting, which was conducted using video conferencing, King Salman also briefed ministers on his recent telephone conversation with US President Donald Trump. He said they affirmed the historical and strategic relationship between the two countries and their commitment to the continuation of joint efforts to enhance security and stability in the region.

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Ministers were then updated on the latest developments in the corona virus crisis, including the steps being taken locally and internationally to control it and safeguard public health, the number of cases in the Kingdom and the care being provided to those who are infected. They also reviewed details of the active screening and testing programs in all parts of the country, which have helped to keep the number of deaths relatively low compared to global rates.

The cabinet praised the efforts being made by government officials to combat the pandemic, and stressed that citizens and expatriates must abide by the precautionary and preventive measures introduced to prevent the spread of the virus.

Ministers described the decision by Saudi Arabia to host the Pledging Event for the Humanitarian Crisis in Yemen 2020 on June 2 as an extension of the Kingdom’s humanitarian and development contribution, which reflects its pioneering role in supporting its neighbor.

The cabinet also welcomed the formation of the new government in Iraq and reiterated Saudi Arabia’s support for the nation and its readiness to work with the new administration to strengthen relations and enhance security and stability in the region.


Saudi Arabia announces 35 more deaths from COVID-19

Updated 14 August 2020

Saudi Arabia announces 35 more deaths from COVID-19

  • The total number of recoveries in the Kingdom has increased to 262,959
  • A total of 3,338 people have succumbed to the virus in the Kingdom so far

LONDON: Saudi Arabia announced 35 more deaths from COVID-19 and 1,383 new cases of the disease on Friday.

Of the new cases, 81 were recorded in Makkah, 77 in Hail, 69 in Jeddah and 63 in Riyadh.

The total number of recoveries in the Kingdom increased to 262,959 after 2,566 more patients recovered from the virus.

A total of 3,338 people have succumbed to the virus in the Kingdom so far.

On Thursday, the health ministry announced Saudi Arabia had conducted more than 4 million COVID-19 polymerase chain reaction (PCR) tests since the beginning of the outbreak.