October 12, 2020 Read More →

Saudi Arabia considers delaying OPEC oil production boost

Wall Street Journal ($):

Saudi Arabia is considering canceling OPEC plans for an oil output hike early next year, senior Saudi oil advisers said, as Covid-19 cases in many parts of the world rise and the expected return of Libyan crude threatens to swell global supplies.

In April, the 13-member, Saudi-led Organization of the Petroleum Exporting Countries and 10 Russia-led producers agreed to carry out record production cuts of 9.7 million barrels a day, as the initial flare-up of the new coronavirus shuttered economies around the world, grounding flights and public transportation and closing offices and factories.

The accord called for producers to return that production gradually, in stages of two million barrels of added crude a day, every six months, assuming the worst of the pandemic would fade before the end of this year. In the summer, the group moved ahead with the first hike in output. The next extra two million barrels a day were expected to start flowing in January.

Oil advisers in Saudi Arabia now say Riyadh is considering postponing the move until the end of the first quarter.

“The market can’t take another two million barrels a day,” said one adviser. Saudi Arabia is the cartel’s largest producer by far, and it has in the past acted unilaterally. That gives it tremendous power to influence OPEC decisions on production.

In its latest monthly report in September, OPEC downgraded its estimates for an expected oil demand recovery next year, saying it wouldn’t come as fast and not be as sizable as expected amid resurgent infections from the Covid-19 virus.

Crude prices have plateaued recently around $40 a barrel, down sharply from the start of the year. Saudi Arabia needs prices of about $76 a barrel to balance its spending this year and $66 a barrel in 2021, according to the International Monetary Fund.

[Summer Said and Benoit Faucon]

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