Oil edges higher on cuts to Saudi exports

Darnell Taylor
March 13, 2019

High drilling activity previous year resulted in a more than 2 million bpd rise in production, to 12.1 million bpd reached this February, making the United States the world's biggest producer of crude oil ahead of Russian Federation and Saudi Arabia, with some 3.6 million bpd being exported in February.

America will add 4m barrels per day (bpd) of oil, mostly from the prolific Permian Basin in Texas.

Crude oil prices are inching higher this week and remain propped up by speculations over a US-China trade agreement, the so-called "Saudi put", tight conditions in the US markets (amidst US net imports in historic low levels and the rising activity in refiners ahead of the summer session), the current OPEC+ agreement to cut oil output and ongoing US sanctions against Iran and Venezuela crude oil exports.

"Annual gains will boost the U.S. to levels never seen in any country, in excess of maximum capacity in both Russian Federation and Saudi Arabia", said the IEA in its five-year.

The was one of the major talking points in a meeting between Petroleum Minister Dharmendra Pradhan and his Saudi counterpart and the chairman of Saudi Aramco, Khalid A Al-Falih, in New Delhi on Saturday. "But, barring this, I think we will just be kicking the can forward", Mr Falih said.

On Jan. 1, OPEC+ began new production cuts to avoid a supply glut that threatened to soften prices.

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Traders also pointed to the political and economic crisis in OPEC-member Venezuela as a driver for oil prices. The group agreed to reduce supply by 1.2 million barrels per day (bpd) for six months. "But my expectation is that April is going to be pretty much like March". In particular, Saudi Arabia's oil production in February fell to 10.136 million bpd, a Saudi industry source told Reuters on Friday, down from 10.24 million bpd in January.

API report on United States crude oil supplies coming up next.

On the other hand, production in United States hit a record of more than 12 million bpd in February.

With a projected 2.3 million barrel of crude oil production per day and $60 oil benchmark in the 2019 budget, the rise in the oil prices, they say is healthy for the finance of the budget which has an unprecedented huge capital expenditure component.

Mr. Falih said Chinese demand was breaking records month after month and estimated the country would breach 11 million bpd this year.

He also invited Saudi Arabia to partner with India in building strategic oil reserves and further invest in India's refining and Petrochemical sectors.

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