Oil Rises as Saudis to Cut Exports, Halliburton Sees Shale Peak

  • Saudi Arabia will cap exports at 6.6 million barrels a day
  • U.S. drillers ‘tapping the brakes’ on output: Halliburton

OPEC Says More Libya, Nigeria Oil Is Needed

Oil rose as Saudi Arabia pledged deep cuts to its crude exports, while Halliburton Co. said the shale boom is slowing down.

Futures rose 1.3 percent in New York. Saudi Arabia, OPEC’s largest producer, will limit exports to 6.6 million barrels a day in August, 1 million lower than a year earlier, Energy Minister Khalid Al-Falih said. Meanwhile, Halliburton, the world’s top fracking-services provider, said U.S. explorers are "tapping the brakes" as oil struggles to breach $50 a barrel.

"He came out and threw that out there at a pretty opportune time," Bob Yawger, director of the futures division at Mizuho Securities USA in New York, said of Al-Falih’s pledge.

Oil remains in a bear market amid concern that rising global output will offset the production curbs by members of the Organization of Petroleum Exporting Countries and its allies, including Russia. The group is likely to become less compliant with its cuts toward the end of this year, with the risk of a domino effect after some members suggested they won’t adhere to their targets, according to JPMorgan Chase & Co.

U.S. shale explorers have helped keep inventories high, but the drilling surge may be plateauing, said Halliburton Executive Chairman Dave Lesar. Drillers are now "making rational decisions" as prices remain low, he said.

West Texas Intermediate for September delivery rose 57 cents to settle at $46.34 a barrel on the New York Mercantile Exchange.

See also: Oil Bulls Snap Out of Funk But OPEC Doubts Still Loom Large

Brent for September settlement was 54 cents higher, closing at $48.60 a barrel on the London-based ICE Futures Europe exchange. Prices lost 1.7 percent last week. The global benchmark crude traded at a premium of $2.26 to WTI.

JPMorgan’s Darling: OPEC Becoming Less Compliant

(Source: Bloomberg)

The deal that OPEC and its allies have implemented since Jan. 1 focused on production cuts rather than export cuts. On Monday in St. Petersburg, Russia, OPEC Secretary-General Mohammad Barkindo said OPEC was in agreement to study “other parameters.”

“From the market’s point of view, the only thing they care about is exports,” said Amrita Sen, chief oil analyst at Energy Aspects. The focus on exports will be “positive” for the oil market balances, she said.

Libya is allowed to keep increasing production and has plans to raise output as high as 1.25 million barrels a day, Al-Falih told reporters in St. Petersburg on Monday. Nigeria is ready to cap or even reduce its supply if it can maintain output of 1.8 million barrels a day, according to people familiar with the matter. Both countries are exempt from OPEC’s cuts agreement due to internal strife that hindered the recovery of their crude production.

Oil-market news:

  • OPEC may need to discuss in November extending the oil output cuts, United Arab Emirates energy minister Suhail Al Mazrouei said.
  • Market rebalancing is on track and is set to accelerate in the second half of the year, OPEC’s Barkindo said.
  • U.S. drillers trimmed the rig count last week by 1 to 764, the first drop in three weeks, according to Baker Hughes data Friday.
  • Nigeria signaled earlier this month that it would cap production when it can maintain stable production of 1.8 million barrels a day.

— With assistance by Ben Sharples, and Angelina Rascouet

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