Experts to Asharq Al-Awsat: Saudi Arabia Playing its Responsible Role in Controlling Oil Market

Workers are seen at a Saudi Aramco facility. (SPA)
Workers are seen at a Saudi Aramco facility. (SPA)
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Experts to Asharq Al-Awsat: Saudi Arabia Playing its Responsible Role in Controlling Oil Market

Workers are seen at a Saudi Aramco facility. (SPA)
Workers are seen at a Saudi Aramco facility. (SPA)

Saudi Arabia announced on Monday its decision to extend the voluntary oil production cut of one million barrels per day until August. Saudi analysts told Asharq Al-Awsat that the Kingdom’s decision would reduce fluctuations in global oil prices and strengthen the efforts of the OPEC+ alliance to support, stabilize and control international markets.

Saudi Arabia’s decision was followed by a similar step by Russia, which also announced reducing its oil exports by 500,000 barrels per day in August.

Experts stressed the importance of voluntary price cuts to achieve price stability and protect producers and consumers alike, noting that the Saudi decision also limits the contraction of global economic growth.

Dr. Mohammad al-Sabban, former senior adviser to the Saudi Energy Minister, told Asharq Al-Awsat that the Kingdom’s decision to extend the voluntary cut achieves stability in oil markets, which are witnessing great fluctuations. He also emphasized that Saudi Arabia was assuming a responsible role in controlling markets, in cooperation with oil-producing countries.

Al-Sabban underscored the importance of the voluntary cut in boosting the role of OPEC+ in the markets, as it confirms that the organization is seeking to achieve stability in the global oil markets.

Economist Dr. Fahd bin Jumaa said the Kingdom, with its recent decision, confirms that it will bear the loss of sales of one million barrels per day, out of concern for market stability.

In remarks to Asharq Al-Awsat, he said: “OPEC+ is making intense efforts to achieve its goals in stabilizing the oil markets, given the global economic situation...”

An official source in the Ministry of Energy said that the Kingdom would extend the voluntary cut of one million barrels per day, which began in July, for another month, adding that the cut could be extended beyond that period.

“The Kingdom’s production for the month of August 2023 will be approximately 9 million barrels per day,” Saudi state news agency SPA quoted an official source in the ministry as saying.

Saudi Energy Minister Prince Abdulaziz bin Salman had previously stated that the cut could be “extendable.”

Shortly after Monday’s announcement, Russian Deputy Prime Minister Alexander Novak said Moscow would cut its oil exports by 500,000 barrels per day in August.

Later on Monday, Algeria said it would cut oil output by an extra 20,000 barrels from Aug. 1-31 to support Saudi Arabia and Russia’s efforts to balance and stabilize oil markets, its energy ministry said.



Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices were little changed on Thursday as investors weighed firm winter fuel demand expectations against large US fuel inventories and macroeconomic concerns.

Brent crude futures were down 3 cents at $76.13 a barrel by 1003 GMT. US West Texas Intermediate crude futures dipped 10 cents to $73.22.

Both benchmarks fell more than 1% on Wednesday as a stronger dollar and a bigger than expected rise in US fuel stockpiles pressured prices.

"The oil market is still grappling with opposite forces - seasonal demand to support the bulls and macro data that supports a stronger US dollar in the medium term ... that can put a ceiling to prevent the bulls from advancing further," said OANDA senior market analyst Kelvin Wong.

JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day (bpd) year on year to 101.4 million bpd, primarily driven by increased use of heating fuels in the Northern Hemisphere.

"Global oil demand is expected to remain strong throughout January, fuelled by colder than normal winter conditions that are boosting heating fuel consumption, as well as an earlier onset of travel activities in China for the Lunar New Year holidays," the analysts said.

The market structure in Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time demand is increasing.

The premium of the front-month Brent contract over the six-month contract reached its widest since August on Wednesday. A widening of this backwardation, when futures for prompt delivery are higher than for later delivery, typically indicates that supply is declining or demand is increasing.

Nevertheless, official Energy Information Administration (EIA) data showed rising gasoline and distillates stockpiles in the United States last week.

The dollar strengthened further on Thursday, underpinned by rising Treasury yields ahead of US President-elect Donald Trump's entrance into the White House on Jan. 20.

Looking ahead, WTI crude oil is expected to oscillate within a range of $67.55 to $77.95 into February as the market awaits more clarity on Trump's administration policies and fresh fiscal stimulus measures out of China, OANDA's Wong said.