Disclosure of Saudi Arabia’s monthly allocations emphasises a new focus on foreign sales that Riyadh deems vital to reduce surplus inventories © AFP
Saudi Arabia is allocating fewer barrels of crude for export next month and at a level below current demand, emphasising the effort by global producers to reduce surplus inventories.
In a rare statement, the Ministry of Energy on Monday said contracted demand for Saudi crude for November was 7.7m barrels a day, but the kingdom has assigned just 7.2m b/d for export.
The disclosure of Saudi Arabia’s monthly allocations emphasises a new focus on foreign sales, alongside production, that Riyadh deems vital to the effort by global producers to reduce surplus inventories.
The remarks also underline how the Opec kingpin, and world’s top oil exporter, is doubling down on its pledge to curb supplies and reduce excess global stockpiles that have kept a ceiling on prices.
“It is very interesting they are now trying to communicate to the market about exports,” said Olivier Jakob at consultancy Petromatrix. “They have gone the extra step of putting out numbers on this, which is the first I’ve ever seen.”
The kingdom was demonstrating “extraordinary leadership” as exports “ultimately shape global inventories and market balances,” the ministry said, in a sign Saudi Arabia sees exports as a benchmark for measuring the deal’s success.
Many analysts have criticised the Opec-led effort that came into effect in January of being ineffective as many countries exported huge amounts of oil even as they said they were trimming output.
Although the kingdom is emphasising a fall in exports to about 7.2m b/d — from 7.8m b/d in January — the same statement shows it has in fact increased its foreign sales from 6.7m b/d in September, a period when the country experiences high domestic demand for oil.
Still, Saudi Arabia has enacted the deepest cuts of all Opec countries to about 10m b/d and exports are well below their 2012-16 average, according to JODI data. November 2016 exports stood at more than 8.2m b/d.
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“The kingdom’s action shows a deeper push to draw down commercial stockpiles as soon as possible,” a Ministry of Energy spokesperson told the Financial Times.
“It may encourage stronger commitment from other producers which will be discussed at the next ministerial meeting,” he said, speaking before next month’s gathering of Opec officials in Vienna.
Talks are under way to extend the pact among Opec and countries outside the cartel, such as Russia, beyond March 2018. Moscow said this week that curbs — of 1.8m b/d — could be prolonged until the end of next year if necessary.
Saudi energy minister Khalid al-Falih said earlier this year that the monitoring committee for the supply cut deal would study export data alongside production. “Exports have now become the key metric for financial markets,” Mr Falih said.
Robust US shale supplies, rising output from countries exempt from the deal — such as Libya and Nigeria — and weaker compliance from some participating countries have also offset some of the cuts.
The statement had little impact on the oil market. International benchmark Brent crude dipped 10 cents to $55.54 a barrel.
This post originally appeared on Financial Times