Saudi Arabia’s crude oil production
Saudi Arabia is the largest crude oil producer among OPEC (Organization of the Petroleum Exporting Countries) members. A Reuters survey estimates that Saudi Arabia’s crude oil production fell by 470,000 bpd (barrels per day) to 9.98 MMbpd (million barrels per day) in January 2017—compared to the previous month.
A Platts survey estimates that Saudi Arabia’s crude oil production fell to 9.98 MMbpd during the same period.
Saudi Arabia and major oil producers’ meeting
In OPEC’s meeting in November 2016, Saudi Arabia decided to reduce its crude oil production by 486,000 bpd from 10.55 MMbpd in October. In January 2017, it reduced the production by 564,000 bpd since October 2016—more than the market expected. It would reduce oversupply in the market and support crude oil (RYE) (VDE) (XOP) (XES) prices.
Higher oil prices motivated Saudi Arabia to increase its crude oil prices to Asian and US buyers for March contracts. However, Saudi Arabia’s main concern is that while it would be the major contributor of a steep production cut, other players including US shale producers, will reap major benefits from its sacrifice. When crude oil prices were lower in 2014 and 2015, Saudi Arabia produced more in order to capture market share and pressure high-cost producers out of the market. For more on US crude oil production, read How Weekly US Crude Oil Production Data Boosted Crude Oil Prices.
Saudi Arabia’s role as a swing producer will have a limited impact on crude oil prices due to the rise in crude oil production from non-OPEC producers such as shale-based producers in the US.
Russia and Saudi Arabia could be a game changer for the crude oil market. We’ll discuss this in the next part.