Saudi raised oil output in June citing ‘increased’ demand

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A Saudi oil company official watches work at a rig. Photo – News.com.au

Saudi Arabia raised its oil production to 10.1 million barrels per day in June, from 9.8 million barrels per day a month earlier, Dowjones quoted an anonymous source as saying on Wednesday.

The Kingdom is currently producing around 10 million barrels per day, the person, who asked not to be named, told Dow Jones Newswires, adding the output rose due to increased demand from customers.

According to a Dow Jones survey carried out earlier this month, the largest Arab economy produced 10.05 million barrels per day in June, unchanged from a month earlier.

Organisation of the Petroleum Exporting Countries (OPEC) agreed to maintain its existing oil-production ceiling of 30 million barrels a day in June. The cartel also pledged to rein-in overproduction after oil prices started to dip lately. The Vienna-based organisation did not disclose any individual production quotas for its members, but asked them to stick to the collective production limit.

OPEC president, Iraqi Oil Minister Abdul Kareem Luaiby, has already sent a letter to member states reminding them to comply with the ceiling, but analysts say Saudi Arabia is unlikely to lower its high output in the short term.

Saudi fair play policy

Saudi National Commercial Bank said in its July Economic Review that the Kingdom’s view of a fair oil price remains $100, despite a slide in oil prices below $90. The report expected that Saudi Arabia will reduce output aggressively should the market balances actually warrant a reduction in production.

“Although the recent downswing in prices below the $90’s level has not prompted any overt reaction from the Kingdom yet, we believe the Kingdom’s view of a fair and defensible oil price remains $100. Should the market balances actually warrant a reduction in production, it is expected that Saudi Arabia will be among the first to reduce output aggressively,” NCB said.

The report noted that although Saudi production hovers around 10 million barrels per day, it has not increased significantly much over the past 10 months.

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