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Saudi Arabia has started boosting oil production after two years of curtailing output. a move that gives Riyadh a jump on other OPEC producers who are expected to open the spigots later this month.
The added crude isn’t huge in terms of overall Saudi production. But it marks a sharp u-turn for Riyadh. which had led a coalition of big producers who have cut back hard on output during the past two years. The added oil could further cool prices. which after topping $80 a barrel on international markets. have subsided more recently.
Last month. Saudi Arabia’s oil minister said he was considering relaxing those production cuts. Saudi Arabia. fellow members of the Organization of the Petroleum Exporting Countries. Russia and a handful of other big crude producers. agreed in 2016 to throttle back their production in an effort to cut global output by 2% from levels at the time. That. they figured. would reduce a glut of oil and lift prices.
It worked. But now that prices are back up again. big consuming nations like the U.S. have complained. worried about its effect on their economies. OPEC in the past has also been mindful that when prices get too high. demand can flag—hitting prices and their own revenue.
Light. sweet crude for July delivery fell 0.3% to $65.74 a barrel on the New York Mercantile Exchange Friday. Brent. the global benchmark. fell 1.1% to $76.46.
Worry about further production shortfalls has mounted amid big outages in Venezuela. as well as Washington’s decision to reinstate sanctions on Iran. That move will effectively cut off many international buyers of Iranian crude over the next few months. making those barrels unsaleable.
OPEC. a cartel of some of the world’s biggest producers. has said it would be responsive to those worries. Saudi oil officials said Friday the kingdom has already boosted output last month by more than 100.000 barrels a day. That has raised Saudi overall output to about 10 million barrels a day.
These officials said Saudi Arabia plans to boost output by at least another 100.000 barrels a day this month but they didn’t say when.
“The move will help ease concerns in the market“ over Iranian disruptions. one of the officials said.
Oil data consultancy Kpler. meanwhile. said it was seeing an uptick in crude oil exports from the kingdom. The firm. which tracks vessels leaving Saudi ports. said it estimates Saudi boosted exports by an extra 300.000 barrels day in May. The uptick occurred in the middle of the month. Exports and production levels don’t always move in tandem. In the past. Saudi Arabia has buttressed added production by taking oil out of storage.
A big question remains about how much OPEC. Russia and its oil-producing allies plan to boost output in total. Some price hawks in the group. eager not to weaken prices too much. have advocated small increases—or none at all.
In recent months. the outages in Venezuela. an OPEC member. and over-compliance by other members of the pact have led to the group producing about 700.000 fewer barrels a day than the 2016 deal calls for.
Saudi Arabia and some other Persian Gulf producers recently favored the idea of increasing overall output by 300.000 to 400.000 barrels a day. The Wall Street Journal has previously reported. Most of that increase would need to come from Saudi Arabia. which enjoys more so-called spare capacity—the ability to quickly ramp up idle fields.
Russia. meanwhile. has floated the idea of boosting output as high as 800.000 barrels a day. the Journal reported. Unlike Saudi Arabia and many OPEC members. Russia has a large non-state oil industry that has chafed at production limits.
