Saudi stresses export cut as OPEC deal sees few tweaks

Bloomberg

Saudi Arabia promised deep cuts to crude exports next month, emphasizing its commitment to eliminating a global oil-supply glut even as OPEC and its allies said Libya and Nigeria would keep
increasing output.
Shipments from the Organization of Petroleum Exporting
Countries’ largest producer will be capped at 6.6 million barrels a day in August, 1 million lower than
a year earlier, Saudi Arabia’s
Energy and Industry Minister Khalid Al-Falih said on Monday. The kingdom won’t act alone to balance the market and other nations should improve their implementation of supply cuts, he said after meeting fellow producers in St. Petersburg, Russia.
At the same time Nigeria and Libya — both exempt from the supply deal — are allowed to keep boosting output to their desired levels, Al-Falih said.
“We remain supportive of our brothers and partners” in the two African countries as they recover, Al-Falih said. “The committee however should monitor the impact of such growth in supply on global supply-demand balances.”
The prospect of one set of
producers curbing output and
exports while another group ramps up reflects a contradiction at the heart of last year’s historic agreement between OPEC and allies
including Russia. While laggards like Iraq come under increased pressure to fulfill their pledged cuts, Libya and Nigeria were free to add 440,000 barrels a day
of production from May to June, prolonging the supply glut.
Libya is allowed to keep increasing production and plans to raise output as high as 1.25 million barrels a day, Al-Falih said. Nigeria is ready to accept a cap if production rises to 1.8 million barrels a day, said Oman’s Minister of Oil and Gas Mohammed Al Rumhy. Reaching those levels would add another half a million barrels a day, according to data compiled by Bloomberg.
Oil slumped into a bear market last month with prices less than $2 higher than when the cuts were agreed on last year. Despite the renewed focus on exports, the meeting the St. Petersburg meeting made no changes to the supply deal to reflect that underwhelming performance. They are still betting that rising demand will help to rapidly deplete fuel stockpiles and buoy prices in the second half.
That could prove to be a risky wager, even with OPEC estimating that global oil consumption will be almost 2 million barrels a day higher on average in the second half of the year compared with
the first six months. Rising supply inside and outside the group suggests the cuts won’t put a significant dent in bloated global inventories by the time the agreement expires in March.
When OPEC holds its next full ministerial meeting in November, it may need to discuss extending the supply curbs further, United Arab Emirates Minister of Energy Suhail Al Mazrouei said in an interview with Bloomberg television on Monday. The price recovery might drag on into the second half of 2018, he said.