Saudi Arabia vows to slash oil exports after price slide

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RIYADH, Jan 10, 2019 (BSS/AFP) – OPEC kingpin Saudi Arabia said Wednesday
it would slash its oil exports by 800,000 barrels per day in January and
promised further cuts as producers move to shore up tumbling prices.

Energy Minister Khalid al-Falih said the kingdom, the world’s top crude
supplier, would cut its exports to 7.2 million bpd in January, down from 8.0
million bpd in November.

He also announced a further 100,000 bpd cut in February.

Benchmark Brent crude climbed back to $60 per barrel on Wednesday for the
first time in several weeks following the Saudi announcement, which came as
producers began implementing a new deal to trim output.

OPEC and its allies decided last month to cut their overall output by 1.2
million bpd from January, to boost prices hit by a supply glut and fears
demand could plummet.

Falih said Saudi production had fallen to 10.2 million bpd, down from the
roughly 11 million bpd it was pumping when oil producers decided to end a
production cut deal in May.

“We are serious about restoring balance to the market,” Falih told a press
conference in Riyadh.

“We are concerned about volatility in the oil market,” he said. “We have
seen peaks and drops in prices (that are) completely unjustified by the
fundamentals.”

Brent crude had hit $85 a barrel in early October, but prices dived more
than 40 percent over the following two months on oversupply and fears a trade
war between the United States and China could slash demand.

They have partially rebounded in the past few days after a new deal came
into effect, under which OPEC and non-OPEC oil producers agreed to trim
output by 1.2 million bpd.

That figure is “more than sufficient to bring balance to the market,” said
Falih, adding that the production cut would trim excess supply.

– Crude prices rally –

Members of the Organization of the Petroleum Exporting Countries and their
partners, who together account for around half of global output, have
presided over a supply glut which had sent oil prices tumbling by more than
30 percent between October and December.

Brent and the world’s other benchmark crude, West Texas Intermediate, both
slumped late last year to 18-month lows of $49.93 and $42.36 per barrel
respectively.

But on Wednesday, Brent crude for March delivery hit $60, up 20 percent on
the figure two weeks ago, prior to a deal between OPEC members and other
major producers to cut output from January 1.

The kingdom also announced Wednesday that its huge oil reserves, already
the second largest in the world behind only Venezuela, are even bigger than
previously thought.

The energy ministry said proven oil reserves stood at 263.2 billion
barrels at the end of last year, up from the figure of 261 billion barrels
that has been used for almost three decades.

The kingdom has another 2.9 billion barrels of crude in a border zone
shared with neighbouring Kuwait, bringing total oil reserves to 266.1 billion
barrels, the ministry said.

Natural gas reserves were also revised upwards from 302.3 trillion cubic
feet (8.56 trillion cubic metres) to 324.4 trillion cubic feet, the ministry
said.

It said the new figures have been backed by an independent third-party
certification by leading consultants DeGolyer and MacNaughton (D&M).

Saudi Arabia, the world’s top oil exporter, is the third biggest crude
producer after the United States and Russia.

Falih said Saudi oil remains among the cheapest in the world to extract,
at only $4 a barrel.

But the kingdom has posted budget shortfalls each year since a major 2014
crash in crude prices, and has turned to borrowing as well as pursuing
economic reforms.

The kingdom on Wednesday raised $7.5 billion, half of the amount it plans
to borrow in 2019, said HSBC, one of the banks involved in the operation.

It was the first time Riyadh has tapped international debt markets since
the October murder of journalist Jamal Khashoggi, which tarnished Saudi
Arabia’s public image. But demand was high, at $27 billion, according to
HSBC.

The operation was not fully concluded, so the interest rates have not yet
been calculated.