Saudi Aramco plans to make "the deepest customer allocation cuts in its history" in oil supplies in November to help reduce global inventories and balance the market.
State-run Saudi Arabian Oil Co., known as Aramco, will make an "unprecedented" cut of 560,000 barrels a day in its allocations to customers next month, the Saudi energy ministry said in a statement. Aramco plans to supply 7.15 million barrels a day "despite very strong demand" that exceeds 7.7 million barrels a day, it said.
"Saudi Arabia is once again demonstrating extraordinary leadership in its commitment to re-balancing the market, as we approach the upcoming key meeting of November 30 in Vienna, by restraining not only the top-line of production volume, but even more importantly the bottom line of exports, which are what ultimately shape global inventories and market balances," the ministry said. "The kingdom expects all other participants in the effort to follow suit and to maintain the high levels of overall conformity achieved in August going forward."
Saudi Arabia, the world's top crude exporter, is leading the Organization of Petroleum Exporting Countries and other producers including Russia in paring output under a deal that helped propel oil into a bull market in September. Lower compliance with the curbs promised by some nations combined with rising production in OPEC members Libya and Nigeria -- both exempt from reducing output because of internal warring -- have added pressure on Saudi Arabia to make deeper cuts of its own.
The Saudi kingdom and Russia were leading consultations between OPEC nations and other major suppliers about the future of their short-term supply caps, OPEC Secretary-General Mohammad Barkindo said Sunday in New Delhi. Bullish developments during the last few months have been largely offset by surging supply additions from U.S. shale drillers.
Brent crude for December settlement rose 17 cents to end the session Monday at $55.79 on the London-based ICE Futures Europe exchange.
West Texas Intermediate crude for November delivery rose 29 cents to settle at $49.58 a barrel on the New York Mercantile Exchange. Total volume traded was about 36 percent below the 100-day average. Prices slid $1.50 to $49.29 on Friday, capping a 4.6 percent drop for the week.
"It's kind of a day of indecision," Michael Hiley, head of over-the-counter energy trading at New York-based LPS Partners, said by telephone. Until producers formally agree to extend the cuts, the market is likely going to ignore OPEC headlines, he said.
U.S. crude stockpiles remain above their five-year average by more than 70 million barrels at a time when refineries are starting to shut for maintenance. Meanwhile, the top American shale plays, led by the Permian and Eagle Ford basins in Texas, are set to produce a record amount of crude this month.
Aramco's announced decrease in allocations for November "constitutes a full 290,000 barrels a day reduction over and above the 486,000 barrels a day" that Saudi Arabia pledged to cut as part of its commitment to the global output accord, the ministry said. This adds up "to a massive total of almost 800,000 barrels a day" in cuts, it said.
Saudi Arabia scaled back exports in September to less than 6.7 million barrels a day, "despite high customer demand and the partial reduction of domestic summer crude burning requirements," the ministry said.
Information for this article was contributed by Carlos Caminada and Jessica Summers of Bloomberg News.
Business on 10/10/2017