Saudi Arabia intends to raise crude production in the coming months to meet mounting customer demand, energy minister Khalid al-Falih said Sunday, rejecting criticism from US President Donald Trump that OPEC was conspiring to keep prices elevated.
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September output from the kingdom is already higher than August’s level of about 10.4 million b/d, Falih said at a meeting of an OPEC/non-OPEC monitoring committee, though he did not provide a specific figure.
“October will be even higher,” he told reporters. But he stressed that Saudi Arabia’s production levels were dictated by customer demand, not to influence prices.
“We have seen higher demand in October,” Falih said.
Saudi Arabia in June had signaled its intent to pump as high as 10.8 million or even 11 million b/d, under OPEC’s agreement with Russia and nine other non-OPEC producers to raise collective output by 1 million b/d.
The plan came amid pressure from the US president, who tweeted at OPEC to do more to cool what was then a rising market.
“Oil prices are too high, OPEC is at it again. Not good!” Trump tweeted June 13, 10 days before the OPEC/non-OPEC coalition met in Vienna to finalize the output boost.
But kingdom officials have said they were confronted with tepid demand after the meeting, forcing them to scale back their plans.
Saudi Arabia reported production of 10.29 million b/d in July, rising to 10.42 million b/d in August.
Now, with customers apparently clamoring for more crude, Saudi Arabia stands ready to supply them, Falih said.
The country holds some 1.5 million b/d of spare capacity that it can tap if needed, he added.
“Our plan is to respond to demand,” he said. “If demand [for Saudi crude] is 10.9 million b/d you can certainly take it to the bank that we will meet it. But the demand is 10.5 million b/d or 10.6 million b/d. I think October will be more than this.”
Falih also acknowledged that some of Saudi Aramco’s crude customers had already started asking for more barrels on top of their term requirements.
“Some of them have started requesting more than their contractual entitlement and Aramco has met those requirements,” he said. Building global storage
Falih also said the world’s largest crude exporter was building up its crude inventories around the world to better address customer anxieties over supply shortfalls.
He said the kingdom has put crude into storage in Okinawa, Japan; Sidi Kerir, Egypt; and Rotterdam, as well as in domestic tanks.
“This is just ensure that going forward as customers require more oil we need to be close to them, and these [efforts] have been successful to ease anxiety that started appearing in the second quarter of this year,” he said.
The increase in storage of Saudi barrels coincides with greater demand for its heavy crude in Europe and North Asia as Iranian crude exports slump ahead of the start of US sanctions.
Europe, South Korea and Japan have already reduced their imports of Iranian crude, and refiners have been eyeing alternative Saudi crudes.
The kingdom’s crude inventories have been falling sharply in the past year, especially its domestic crude stocks, which slid to a nine-year low in July, according to figures from the Joint Organizations Data Initiative.
The Saudi stock draw averaged 178,000 b/d in July, a significant rise from a 15,000 b/d draw in June and a 30,000 b/d build in May, according to JODI data.
Outright, Saudi Arabia drew 5.51 million barrels of crude from storage in July — its most in eight months — taking its crude stocks to 229 million barrels, the lowest since October 2009. –Staff, email@example.com
–Edited by Paul Hickin, firstname.lastname@example.org