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2021-01-06 14:00:00

SAUDI ARABIA CUT PRODUCTION

SAUDI ARABIA CUT PRODUCTION

PLATTS - 05 Jan 2021 - Saudi Arabia has delivered what Russian Deputy Prime Minister Alexander Novak called "a New Year's gift" to the oil market with its surprise announcement of an extra 1 million b/d production cut, blowing away expectations that the OPEC+ alliance would merely roll over its collective output ceiling.

The kingdom will hold its February and March crude production to 8.125 million b/d -- well below its quota of 9.119 million b/d -- to help bring down oil inventories that had bloated from the pandemic, Saudi energy minister Prince Abdulaziz bin Salman said Jan. 5, after two days of OPEC+ talks.
"We do that with the purpose of supporting our economy, the economies of our friends and OPEC+ countries, and for the betterment of the industry at all levels," he said in a post-meeting press conference.

The cut is unilateral, with no other countries following suit. It will more than offset modest increases granted to Russia and Kazakhstan after hard-won negotiations. Those two countries will be allowed to boost their output by a combined 75,000 b/d in February and another 75,000 b/d in March, with all other OPEC+ members holding their quotas steady from January.

The news juiced oil prices, with front-month Brent futures jumping more than 5% to $53.66/b at 1857 GMT.

And it came as a pleasant shock to many OPEC+ members, who were left in the dark on Saudi Arabia's announcement until Prince Abdulaziz revealed the cut to reporters after the meeting.

Delegates said the prince had hinted that a unilateral cut might be coming, telling ministers that he had "a fantastic proposal in my pocket," but had not said what the volume would be.

Novak, who had met with him in Riyadh Dec. 19, was the only one privy to the plan, the prince said.

The deputy prime minister lauded Saudi Arabia's "great contribution," saying the kingdom "is playing a major role in ensuring a normal level of stocks on the market."

The kingdom will hold its February and March crude production to 8.125 million b/d -- well below its quota of 9.119 million b/d -- to help bring down oil inventories that had bloated from the pandemic, Saudi energy minister Prince Abdulaziz bin Salman said Jan. 5, after two days of OPEC+ talks.
"We do that with the purpose of supporting our economy, the economies of our friends and OPEC+ countries, and for the betterment of the industry at all levels," he said in a post-meeting press conference.

The cut is unilateral, with no other countries following suit. It will more than offset modest increases granted to Russia and Kazakhstan after hard-won negotiations. Those two countries will be allowed to boost their output by a combined 75,000 b/d in February and another 75,000 b/d in March, with all other OPEC+ members holding their quotas steady from January.

The news juiced oil prices, with front-month Brent futures jumping more than 5% to $53.66/b at 1857 GMT.

And it came as a pleasant shock to many OPEC+ members, who were left in the dark on Saudi Arabia's announcement until Prince Abdulaziz revealed the cut to reporters after the meeting.

Delegates said the prince had hinted that a unilateral cut might be coming, telling ministers that he had "a fantastic proposal in my pocket," but had not said what the volume would be.

Novak, who had met with him in Riyadh Dec. 19, was the only one privy to the plan, the prince said.

The deputy prime minister lauded Saudi Arabia's "great contribution," saying the kingdom "is playing a major role in ensuring a normal level of stocks on the market."

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