Saudi Arabia insists no going back on excess oil production

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Libyan production remains at less than one quarter of its 1.6 million b/d capacity, with output slipping to just 360,000 b/d in August from 390,000 b/d in July because of ongoing technical problems at fields in eastern Libya and continued blockades of other key oil infrastructure across the country.

Last week, the U.S. government’s Energy Information Administration said June oil production was about 9.3 million barrels per day (bpd), down 100,000 bpd from May and 250,000 bpd below the agency’s previous estimate after figures were revised using its new survey-based method.

Emphasizing that the slightest fluctuation in China’s economy hits all markets including the oil market, this official asserted that, “over the past few years, Iran has stood against events like sanctions and falling oil prices; therefore, we are familiar with the country’s economic conditions at the time of low oil prices”.

Supply to the market, both domestically and for export, may differ from production depending on the movement of oil in and out of storage. Saudi Arabian crude oil import shares were almost unchanged in China, Japan, India, South Korea, Taiwan, and Thailand, while declining in Singapore.

Saudi Arabia traditionally burns more crude for power generation during the summer months through to September. But the quandary for Saudi Arabia and Opec is that it has become increasingly apparent that, while lower prices might have forced a cut in USA production, that can be quickly reversed.

Saudi Arabia’s policymakers may now realise that they {can not |can’t} just rely on a policy of aggressive market share defence and expect the high-cost producers to balance the market eventually. If Saudi Arabia continues to increase its refinery input, the amount of crude oil available for export may decline, reducing its crude oil market share not only in Asia but in other regions as well.

Furthermore, with Iran preparing to increase supply once worldwide sanctions are removed, the battle for market share that initially appeared to be focused on non-OPEC producers is now also raging within OPEC itself.

Zanganeh further enumerated three main causes of the decline in oil prices as strengthening of USA dollar against euro, economic surplus, and economic crisis adding that, “having a multi-trillion-dollar economy, China exerts a significant effect on the world market“.

Saudi Arabia increased production and kept its export levels high, enabling it to maintain its market share in these countries.

 

In the first half of 2015, Saudi Arabia exported, on average, 4.4 million bpd of crude oil to seven major trading partners in Asia, making up more than half of Saudi Arabia’s total crude oil exports over that period.

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