Saudi Arabia lobbies Opec and allies to deepen oil production cuts
Kingdom hopes to boost market ahead of state-owned Aramco IPO
Cuts to oil production by the Organisation of the Petroleum Exporting Countries (Opec) and non-member allies (Opec+), are set to intensify as Saudi Arabia tries to create a positive market ahead of the listing of Saudia-Aramco, its state oil and gas firm.
The cartel is currently discussing an increase to existing cuts from 1.2 million barrels per day to 1.6 million barrels – 1.6 percent of global supply.
Although Saudi Arabia is spearheading the call for further cuts, other countries are prepared to agree. The latest report from Opec’s Economic Commission Board found that without additional cuts, the oil market would experience a significant oversupply and build-up in inventories for the first half of next year.
The oil-rich Middle Eastern Kingdom requires prices to stay high not just to support the pricing of the Aramco IPO but also to balance its budget. This is a major motivation for the Aramco float. The IPO is the jewel in the crown of Crown Prince Mohammed bin Salman’s Saudi Vision 2030 project, which seeks to diversify the Saudi economy away from oil revenues.
Saudi Arabia has already been cutting oil production by more than agreed amounts for most of 2019. According to a Reuters survey in November Saudia Arabia cut production by 783,000 barrels per day, 461,000 barrels more than it had pledged to.
FURTHER READING: OPEC lowers forecast for global oil demand growth