Saudi Arabia won't unilaterally cut oil production as it and
fellow OPEC members discuss how to cope with a possible increase in
global crude output, according to people familiar with the
matter.
Earlier this month, the Organization of the Petroleum Exporting
Countries, a group of some of the world's largest oil producers,
said it would keep its output ceiling unchanged. But OPEC officials
have been publicly and privately jostling over whether the group
might have to throttle back--should global oil output rise
significantly and threaten to weaken prices--and how to divvy up
any cuts among members.
For the past two years, Saudi Arabia has essentially promised to
steady markets no matter what fractious OPEC delegates decide.
Saudi ministers walked out of an OPEC meeting in 2011 after members
failed to agree to raise the group's collective output to help make
up for lost global output owing to civil war in Libya. As recently
as last month, Saudi officials had said Riyadh was willing to act
alone to steady markets, whether other OPEC members agreed or
not.
But now, with pressure growing over a possible output cut to
steady markets, Saudi is signaling it is no longer willing to go it
alone.
"Saudi Arabia is done with its role as swing producer," said one
official familiar with matter. "It is not Saudi Arabia's role
anymore to adjust output to protect the market or balance (it.) It
is the (responsibility of) OPEC."
And on Thursday, at least one other OPEC member acknowledged
that new stance. Suhail Mohammed Al Mazrouei, energy minister for
the United Arab Emirates, told reporters that OPEC would act
"collectively." OPEC members "cannot do something unilaterally," he
said.
Saudi Arabia is the OPEC member with the most so-called spare
capacity-the ability to ramp up or idle production quickly to
accommodate market demand. For years, Saudi Arabia's has been a
steadying voice in the oil market, constantly reassuring consumers
that it will produce enough oil to meet demand amid a series of
supply disruptions.
More recently, however, OPEC has faced a very different issue:
U.S. crude oil output is surging, and a number of OPEC members are
also poised to ramp up production.
Iraq, long sidelined by Saddam-era sanctions and post-invasion
setbacks, is now producing more than it has on an annual basis in
at least 20 years. Iran, subject to tough sanctions that have dried
up its market share, has made diplomatic progress with the West.
That has raised hopes in Tehran that it will soon be able to sell
more of its crude.
And in Libya, officials have said they are closing in on a deal
with striking workers who have shut down terminals, essentially
strangling exports from that North African oil heavyweight.
All that has come at a time when OPEC says demand for its oil
has receded in the short term.
Long-term demand forecasts for OPEC crude remain buoyant, the
group and other analysts say.
OPEC has recently trimmed output to just below its agreed
ceiling of 30 million barrels a day, but has so far held off on
officially lowering that ceiling. Saudi Arabia, meanwhile, has
already unilaterally lowered its production to 9.6 million barrels
a day in November, from 10.1 million barrels a day in August,
according to OPEC figures.
One Persian Gulf oil official said the Saudis "are fighting the
pressure that could come on them" to further reduce production on
their own. "They don't want to carry the burden alone," this
official said.
Write to Summer Said at Summer.Said@wsj.com, Benoit Faucon at
Benoit.Faucon@wsj.com and Sarah Kent at Sarah.Kent@wsj.com
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