Saudi Arabia to Cut Oil Production by 500,000 Barrels per Day

With the increase in oil supply and a significant drop in prices, Saudi Arabia has announced its intention to reduce its daily production by 500,000 barrels in December. The OPEC monitoring committee met on Sunday, November 20, in the UAE to discuss the global oil market situation. According to Reuters, Saudi Oil Minister Khalid Al-Falih announced on the sidelines of this meeting that Riyadh plans to cut its production by 500,000 barrels for December. Two sources familiar with the matter told Reuters that Saudi Arabia wants OPEC members and allied countries to reduce their production by up to one million barrels per day to raise prices. Initially, the U.S. had announced its intention to cut Iran's oil production, and OPEC members and allied countries had significantly increased their production in recent months. However, on November 14, Washington announced that it had granted exemptions to eight countries to continue purchasing Iranian oil. Following this news, oil prices plummeted, dropping 18% compared to the previous month. Reports from the OPEC monitoring committee indicate that no agreement has yet been reached on reducing oil production. The Associated Press quoted Mr. Al-Falih as saying that there is still no consensus among OPEC members. The Oil Minister of Oman also recently stated that many OPEC members and allied countries believe production should be reduced. He said it is not appropriate to announce a specific figure, but the majority agree that production should be cut by 500,000 barrels. Meanwhile, Al Arabiya reported on Mr. Al-Falih's statements regarding the country's plan to reduce production by 500,000 barrels, stating that Saudi Arabia believes the oil market will face oversupply again next year and that the Riyadh government is prepared to reduce its production. However, Alexander Novak, the Russian Oil Minister, stated at the OPEC monitoring committee meeting on Sunday that he believes the market will not face an oil surplus and that there is no need for production cuts. Recently, Reuters reported that OPEC member countries, despite the significant reduction in oil production from Iran and Venezuela, increased their production by another 390,000 barrels last month, reaching 33.31 million barrels. This figure shows an increase of over 900,000 barrels compared to OPEC production earlier this year. The continued increase in OPEC oil production despite the reduction in Iranian and Venezuelan oil production, along with the exemption granted by the U.S. to eight major buyers of Iranian oil, has caused oil prices to drop to around $70 on Sunday, whereas at the beginning of last month, the price was above $85. Iran's oil revenue is decreasing amid significant revenue growth for other OPEC members. Saudi Arabia claims its oil production is currently 10.7 million barrels per day, which is an increase of over 700,000 barrels compared to April (one month before the U.S. exited the JCPOA). According to the International Energy Agency's assessment, global oil consumption is expected to grow by 1.3 million barrels per day next year, but oil production growth will exceed this figure by 500,000 barrels. Meanwhile, the Russian Oil Minister stated that Russia is ready to cooperate with Iran for oil exports, but Iran has preferred to work with its oil customers so far. According to the Russian news agency Interfax, in response to a question about whether Russia is seeking a mechanism to increase Iranian oil exports, he said that Iran continues to cooperate with its oil customers. "We cooperate with Iran on many issues, including energy, and these collaborations are expanding. Both Iran and Russia are oil sellers. We have our sales, and Iran has its sales." Novak had previously stated that since November of last year, a daily barter contract for 100,000 barrels of Iranian oil for Russian goods had begun, and the Moscow government does not intend to stop this transaction due to U.S. sanctions. However, on November 14, the U.S. only allowed eight countries to continue purchasing oil from Iran, and Russia was not on the list of exempted countries. Novak said Russia must seek a mechanism that allows for the development of relations with its partners, including Iran. He stated that the oil barter contract had created conditions under which, in exchange for receiving oil, Russia could sell its goods to Iran.