Crude Market Is ‘Oversupplied,' Saudi Arabia's Oil Minister Al-Naimi Says
Saudi Arabia’s Oil Minister Ali al- Naimi said the global “market is oversupplied” with crude even as the world’s largest oil producer cut output last month by more than 800,000 barrels a day.
“Our production in February was 9,125,100 barrels a day,” al-Naimi said, as he arrived in Kuwait for a conference. “In March, it was 8,292,100 barrels. It will probably go a little higher in April. The reason I mention these numbers is to show you the market is oversupplied.”
Saudi Arabia’s spare production capacity is about 3.5 million barrels a day, and its total capacity is 12.5 million barrels a day, he said today.
Saudi Arabia, the biggest oil exporter, has said it will make up for any crude production lost as a result of the Libyan conflict, which erupted in mid-February. The March decline in Saudi output coincides with a decrease in demand from Japan, the world’s third-largest crude user, after the March 11 earthquake that shuttered 29 percent of the Asian nation’s refinery capacity.
“Japan imports 4.2 million barrels a day of oil,” Vice Minister of International Affairs Hideichi Okada said in Kuwait. “The Japanese economic growth rate will decrease to some extent, and that means our demand will slow down. Our demand will slow for a certain period, then our demand will go up again.”
New Blends Sold
Saudi Arabia sold 2 million barrels of new blends of oil it has developed to help replace Libyan barrels withheld from the market, “and there is plenty left,” al-Naimi said.
The kingdom pumped 9.02 million barrels of crude oil a day in February, up 5.9 percent from the previous month, according to official data posted today on the government’s Joint Organization Data Initiative website. The increase of 506,000 barrels a day over January raised Saudi monthly production to its highest level since October 2008, when the country produced 9.52 million barrels a day, the data showed.
“This means that Saudi Arabia did take the necessary measures to cushion the global oil market against any Libyan oil losses,” John Sfakianakis, the chief economist at Riyadh-based Banque Saudi Fransi, said today by telephone.
The new Saudi blends have seen a “lukewarm response” from European refiners, Amrita Sen, an analyst at Barclays Plc, wrote in an April 14 investor note.
Crude oil for May delivery climbed $1.55 to settle at $109.66 a barrel on the New York Mercantile Exchange on April 15. Al-Naimi declined to comment on U.S. futures prices, which are up 28 percent from a year ago.
Saudi Arabia agreed to a production quota of 8.051 million barrels a day as part of its membership in the Organization of Petroleum Exporting Countries.
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