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Saudi Arabia doubles effort to re-balance oil market, shore up prices

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With eyes on shoring up oil prices, Saudi Arabia is committing to even more cuts in both production and export of its crude oil by April, a Saudi official has said on Monday.

The Kingdom plans to cut its crude oil exports to below seven million barrels per day (bpd) and to keep its output “well below” 10 million bpd. This is because the kingdom seeks to drain a supply glut and support oil prices.

State-owned Saudi Aramco’s oil allocations for April are 635,000 bpd below customers’ nominations requests made by refiners and clients for Saudi crude, the Saudi official said.

“In spite of very strong demand from international waterborne customers at more than 7.6 million bpd, customers were allocated less than 7 million bpd,” the official said. March’s oil exports will also be below seven million bpd, the official said.

Saudi Arabia faces a budget imbalance that will require oil prices to hold at 30 percent above current price levels to redress and other oil exporting countries, such as Nigeria also face varying degrees of exposure.

An International Monetary Fund official recently said the world’s top oil exporter would needs oil priced at $80-$85 a barrel to fix its budget imbalance.

International Benchmark Brent crude traded at $66.63 as at 2:52pm local time. And the West Texas Intermediate was trading at $56.88 as at 2:52 local time.

But if you take Saudi Arabia’s 2019 “budget as presented with everything remaining equal, a breakeven point would be around $80-$85 dollars,” Jihad Azour, director of the IMF’s Middle East and Central Asia department, told Reuters.

The April allocations by Aramco show “a deep cut of 635,000 bpd from customer requests for its crude oil. This will keep production well below 10 million bpd in April,’’ the official said.

The official added that this was also below the 10.311 million bpd that the kingdom had agreed as its production target under an OPEC-led supply cut agreement.

The Organisation of the Petroleum Exporting Countries (OPEC) and other producers such as Russia, colloquially known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from Jan. 1 for six months.

“Saudi Arabia is demonstrating extraordinary commitment to accelerating market rebalancing,” the Saudi official said, adding that the kingdom expects all other OPEC+ countries to show similar levels of contributions and high conformity.

Khalid al-Falih, Saudi Energy Minister, on Sunday said that March oil production was 9.8 million bpd and that the country, OPEC’s biggest producer, planned to keep its April output at the same level.

Saudi Arabia’s oil production in February fell to 10.136 million bpd, a Saudi industry source on Friday said, down from 10.24 million bpd in January.

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