SAUDI CUTS OUTPUT
Saudi Arabian oil output fell 400,000 barrels a day in August according to a report issued by Opec that coincided with another drop in the price of Brent, the international oil marker.
In its monthly report, the oil producing cartel said the Gulf nation produced 9.6m b/d a day in August, down from 10m b/d in July. Only four times in the last decade have the cuts been as great.
The sharp drop in the price of Brent since mid-June has prompted some market participants to question whether Saudi Arabia will curb its output to keep global supply in check and support prices.
On Wednesday, ICE Brent October fell $1.52 hitting a seventeen month low of $97.72 a barrel.
Excess oil in the Atlantic Basin and the North Sea, amid a pullback in demand from European refiners, has combined with robust North American production volumes to drive down price. At the same time output in Libya and Iraq has increased, despite violence ravaging both countries, adding further pressure.
Opinion was divided on the significance of the drop.
Many analysts had expected a lower August production number from Opec's largest producer, as air conditioning demand fell because of temperatures that were cooler than normal for the time year.
But others have said that even accounting for the seasonal variations, the drop was greater than the January to August average leading them to question if the holder of the world's largest spare output capacity is taking steps to curb output.
Wednesday's report also saw Opec reduce its 2014 global oil demand forecast for a third consecutive month.
The organisation now expects it to rise this year by 1.05m b/d, down 50,000 b/d from prior forecasts. Demand is set to pick up in 2015, but even this estimate was trimmed by 20,000 b/d.
These revisions led to a reduction in the demand for OPEC crude by 160,000 b/d in 2014 and 2015.
"This is the clearest acknowledgment on Opec's part that the current requirement for Opec crude is far less than they are currently supplying to the market. We would hence expect Opec to reduce oil output in coming months and a large chunk of this could easily come from Saudi Arabia," said Abhishek Deshpande, analyst at Natixis.
While acknowledging the production cut, analysts such as Olivier Jakob at Petromatrix, said that this did not necessarily mean lower exports, adding that Saudi Arabia was still more interested in retaining market share.
Rising supply from outside Opec, in particular the US due to greater tight oil production, has put many member nations' under pressure.
"The big slash in October selling prices is to do with the Saudis seeking to keep market share," said Mr Jakob. "And then, maybe they did not manage to sell as much as they wanted in August leading them to pull back on production."
Mounting competition from rival producers and sluggish demand in industrialised nations has pushed the price of oil lower below the $100 a barrel mark, which is considered a key level for many Opec producers.
Mr Jakob said that Saudi Arabia and others were watching for how demand fluctuated in response to lower prices to Asia, Europe and the US before making any significant cuts to production and exports.
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