Saudi Arabia output exceeds oil-production cap
The world’s biggest oil exporter boosted output from 9.88m bpd in May 10.07m barrels per day Saudi oil output in June
Saudi Arabia told Opec it pumped 10.07 million barrels a day in June, a person with knowledge of the data said, exceeding its production limit for the first time since brokering a deal to curb global crude supply to counter a glut.
The world’s biggest oil exporter boosted output from 9.88 million barrels a day in May, surpassing the limit of 10.058 million it accepted in an agreement between Opec and other major suppliers including Russia. Under the deal reached in December, Saudi Arabia agreed to reduce production by 486,000 barrels a day, the most of any country participating in the cuts. The person with knowledge of the June data asked not to be identified because the information isn’t public.
Crude has declined 18 per cent this year, entering a bear market in June amid concerns that rising world supply will outweigh production cuts from the Organisation of Petroleum Exporting Countries and allied producers that took effect in January.
Opec needs to “shock and awe” the oil market with deeper cuts for prices to gain, Goldman Sachs Group Inc. said in a July 10 report.
Atype of US crude pumped in the Gulf of Mexico is proving to be more attractive in the fastest-growing oil market compared with Middle East staples that are on offer.
Indian Oil Corp., the nation’s largest refiner, has bought Mars Blend crude for arrival in October to the South Asian nation, according to Arun Kumar Sharma, the company’s finance director. That’s the processor’s first purchase of American supply. About 1.6 million barrels of the grade will be loaded with 400,000 barrels of West Canadian Select on a very large crude carrier, he said.
The shipment is set for Asia as arbitrage flows of Mars crude to the world’s biggest oil market become viable versus Middle East oil, supplies of which have been reduced by Opec’s output curbs aimed at easing a glut. The cuts have turned regional benchmark Dubai crude costlier relative to other markers such as Brent and US West Texas Intermediate, luring rival supplies to India as well as other big consumer nations.
“Middle Eastern suppliers are waking up to the growing dominance of US crude in the Asian market,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London. “Heavy grades of US crude have become more price competitive compared with those from the Middle East, thanks to Opec’s oil-output cut, which provided the US an opportunity to boost its own oil production.”
Mars crude traded at about 70-90 cents a barrel below WTI on a free-on-board (FOB) shipping basis late last week, according to a Bloomberg survey of four traders.
“North American crude has become very competitive to Middle East crude because of narrowing Brent-Dubai differentials and low freight charges,” Indian Oil’s Sharma said. The company, which bought the crude via a tender, purchased the US oil at a price “very close to Basrah Light,” he said, referring to Iraq’s flagship grade.
Another state-run Indian refiner, Bharat Petroleum Corp., is also seeking 1 million barrels of US crude for delivery in September-October to Kochi on the nation’s west coast, according to a tender document.