A super tanker berths at Saudi Aramco’s Ras Tanura Sea Island Terminal, part of the Port of Ras Tanura, the world’s largest crude oil export terminal complex (file). Saudi is the Opec member with the most spare capacity - the ability to ramp up or idle production quickly to accommodate market demand. Picture: www.saudiaramco.com
Saudi Arabia won’t unilaterally cut oil production as it and fellow Opec members discuss how to cope with a possible increase in global crude output, according to people familiar with the matter.
Earlier this month, the Organisation of the Petroleum Exporting Countries, a group of some of the world’s largest oil producers, said it would keep its output ceiling unchanged. But Opec officials have been publicly and privately jostling over whether the group might have to throttle back-should global oil output rise significantly and threaten to weaken prices-and how to divvy up any cuts among members.
For the past two years, Saudi Arabia has essentially promised to steady markets no matter what Opec delegates decide. Saudi ministers walked out of an Opec meeting in 2011 after members failed to agree to raise the group’s collective output to help make up for lost global output owing to civil war in Libya. As recently as last month, Saudi officials had said Riyadh was willing to act alone to steady markets, whether other Opec members agreed or not.
But now, with pressure growing over a possible output cut to steady markets, Saudi is signalling it is no longer willing to go it alone.
“Saudi Arabia is done with its role as swing producer,” said one official familiar with matter. “It is not Saudi Arabia’s role anymore to adjust output to protect the market or balance (it.) It is the (responsibility of) Opec.”
And yesterday, at least one other Opec member acknowledged that new stance. Suhail Mohammed al-Mazrouei, energy minister for the UAE, told reporters that Opec would act “collectively.” Opec members “cannot do something unilaterally,” he said.
Saudi Arabia is the Opec member with the most spare capacity-the ability to ramp up or idle production quickly to accommodate market demand. For years, Saudi Arabia’s has been a steadying voice in the oil market, constantly reassuring consumers that it will produce enough oil to meet demand amid a series of supply disruptions.
More recently, however, Opec has faced a very different issue: US crude oil output is surging, and a number of Opec members are also poised to ramp up production.
Iraq, long sidelined by Saddam-era sanctions and post-invasion setbacks, is now producing more than it has on an annual basis in at least 20 years. Iran, subject to tough sanctions that have dried up its market share, has made diplomatic progress with the West. That has raised hopes in Tehran that it will soon be able to sell more of its crude.
And in Libya, officials have said they are closing in on a deal with striking workers who have shut down terminals, essentially strangling exports from that North African oil heavyweight.
All that has come at a time when Opec says demand for its oil has receded in the short term.
Long-term demand forecasts for Opec crude remain buoyant, the group and other analysts say.
Opec has recently trimmed output to just below its agreed ceiling of 30mn bpd, but has so far held off on officially lowering that ceiling. Saudi Arabia, meanwhile, has already unilaterally lowered its production to 9.6mn bpd in November, from 10.1mn bpd in August, according to Opec figures.
One Gulf oil official said the Saudis “are fighting the pressure that could come on them” to further reduce production on their own. “They don’t want to carry the burden alone,” this official said.
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