Saudi Arabia to Pull Back Production After Summer -- Sources# Stock
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July 29, 2015 1:32 p.m. ET
By Summer Said
RIYADH--The world's top crude-oil exporter, Saudi Arabia, is planning to
pull back from record-high levels of production at the end of the summer
when domestic energy demand subsides, according to people with knowledge of
the matter.
The reduction could begin as soon as September and would amount to about 200
,000 to 300,000 barrels a day, bringing production to about 10.3 million
barrels a day, the people said. Saudi Arabia told the Organization of the
Petroleum Exporting Countries that it produced 10.56 million barrels a day
in June, a record high.
"It is purely based on the [domestic] demand situation," one of the people
said, adding that "production is likely to hover around" 10 million barrels
until the end of the year.
Saudi Arabia--one of a handful of countries that generates electricity by
burning crude oil--generally reduces production in the fall, when demand for
the heavily subsidized energy to power air conditioners cools off. But the
upheaval in world energy markets led some to believe this year would be
different.
Challenged by oil prices down by half in the past year, the kingdom, along
with the Organization of the Petroleum Exporting Countries, abandoned its
traditional role of trying to prop up prices with supply cuts. Instead, it
has embarked on a production tear, ramping up output to record levels to
maintain its share of the market.
The planned reduction likely wouldn't affect exports and demonstrates that
at least part of the kingdom's recent production figures were related to its
domestic-energy needs. Much of the recent production went to Saudi Arabia's
domestic refineries, including the two 400,000 barrels a day refineries it
recently brought online with France's Total and China's Sinopec.
Saudi production figures are closely watched by oil investors as an
indicator of global supplies, as the kingdom produces more than 10% of the
world's crude. Some experts have predicted the world's top oil exporter
would have to produce up to 11 million barrels a day to meet demand for both
exports and domestic needs.
But people with knowledge of the matter said 11 million barrels was unlikely.
The country has the ability to produce 12.3 million barrels a day for 90
days, but it has never pumped this much. Saudi output averaged 9.22 million
barrels a day from 2006 to 2014, according to the U.S. Energy Information
Administration.
Write to Summer Said at [email protected]
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By Summer Said
RIYADH--The world's top crude-oil exporter, Saudi Arabia, is planning to
pull back from record-high levels of production at the end of the summer
when domestic energy demand subsides, according to people with knowledge of
the matter.
The reduction could begin as soon as September and would amount to about 200
,000 to 300,000 barrels a day, bringing production to about 10.3 million
barrels a day, the people said. Saudi Arabia told the Organization of the
Petroleum Exporting Countries that it produced 10.56 million barrels a day
in June, a record high.
"It is purely based on the [domestic] demand situation," one of the people
said, adding that "production is likely to hover around" 10 million barrels
until the end of the year.
Saudi Arabia--one of a handful of countries that generates electricity by
burning crude oil--generally reduces production in the fall, when demand for
the heavily subsidized energy to power air conditioners cools off. But the
upheaval in world energy markets led some to believe this year would be
different.
Challenged by oil prices down by half in the past year, the kingdom, along
with the Organization of the Petroleum Exporting Countries, abandoned its
traditional role of trying to prop up prices with supply cuts. Instead, it
has embarked on a production tear, ramping up output to record levels to
maintain its share of the market.
The planned reduction likely wouldn't affect exports and demonstrates that
at least part of the kingdom's recent production figures were related to its
domestic-energy needs. Much of the recent production went to Saudi Arabia's
domestic refineries, including the two 400,000 barrels a day refineries it
recently brought online with France's Total and China's Sinopec.
Saudi production figures are closely watched by oil investors as an
indicator of global supplies, as the kingdom produces more than 10% of the
world's crude. Some experts have predicted the world's top oil exporter
would have to produce up to 11 million barrels a day to meet demand for both
exports and domestic needs.
But people with knowledge of the matter said 11 million barrels was unlikely.
The country has the ability to produce 12.3 million barrels a day for 90
days, but it has never pumped this much. Saudi output averaged 9.22 million
barrels a day from 2006 to 2014, according to the U.S. Energy Information
Administration.
Write to Summer Said at [email protected]
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