2023-08-23 17:01:30
5 analysts said, on Wednesday, that Saudi Arabia will likely extend a voluntary cut in oil production by one million barrels per day for a third month in October, amid an atmosphere of uncertainty about supplies, and with the Kingdom targeting further reductions in stocks in the world.
OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, approved a wide-ranging agreement in early June to cut supplies until the end of 2024.
Saudi Arabia then announced an additional voluntary cut, bringing its oil production to a multi-year low of nine million barrels per day.
Earlier this month, Riyadh extended the voluntary cut to September. The Energy Department said it could be extended or extended and increased as well.
“We think Saudi Arabia will extend the full cut to at least October,” said Richard Bruns, an analyst at consultancy Energy Aspects.
“The kingdom is adopting a cautious approach after the weakness in oil markets in the first half of the year, and would like to see global stocks drop significantly before starting to undo the additional voluntary cuts,” he added.
The Saudi Energy Ministry has not yet responded to a request for comment.
Brent crude prices rose in July 14% from the previous month, the largest monthly increase since January 2022. Prices in August are set to fall by about 3% from the previous month, under pressure from concerns about Chinese demand.
Traders and analysts said China was also drawing on record inventories built up earlier this year after high oil prices prompted refiners in the world’s largest oil importer to cut back on purchases.
Two other analysts, John Evans of brokerage firm B.V. Mother. Oil and Ole Hansen of Saxo Bank, that the possible resumption of oil production from the Kurdistan region of Iraq may prompt Riyadh to prevent the pumping of additional supplies for the time being.
Iraq and Turkey held talks this week to resume exports of about 450,000 barrels per day from northern Iraq that Turkey halted in late March, but no agreement has yet been reached.
Baghdad was able to partially compensate for the loss of exports from the north by increasing production elsewhere. In July, it produced 4.2 million bpd, according to secondary OPEC sources, just below its quota under the OPEC+ deal.
“The market remains fragile, especially with major refinery maintenance in October,” said Gary Ross of Black Gold Investors and a veteran OPEC watcher.
UBS analyst Giovanni Stonovo said Saudi Arabia will likely only scale back its voluntary cut when it sees that global oil stocks are much lower than current levels.
“Cutting production is easy, but it’s a different matter to get it back, especially if market fundamentals are not strong enough to support that,” Hansen said.
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