At the meeting of OPEC and non-OPEC producers in St. Petersburg on Monday, Saudi Arabia announced its intention to take further action to bolster flagging oil prices. Saudi oil minister Khaled al-Falih declared Saudi oil exports would be limited to 6.6 million bpd, a decline of almost a million bpd from the country’s export level last year.
The oil minister reported that global inventories had fallen by 90 million barrels, crediting the OPEC production cuts. Yet he also said that stocks remained at historically-high levels and additional action by producers would be needed for levels to recede.
Prices rose as a result of the Saudi declaration, with WTI rising past $46 and Brent nearly $49 after the news broke.
The vow to cut additional production is an indication that the Saudi strategy to reduce global production, cut into historically-high inventories and raise world prices, has not succeeded as they hoped. Cuts by OPEC members have been offset by increases in U.S. production as well as OPEC members like Libya and Nigeria, which are exempt from formal cuts.
As OPEC’s largest producer and the world’s largest oil exporter, Saudi Arabia has taken some significant measures to rescue prices, after letting them languish amidst over-production between 2014 and 2016.
Recently, Riyadh cut exports to the United States in a bid to cut into American inventories, which had become noticeably bloated due to high U.S. production. According to the EIA, American imports from Saudi Arabia averaged 524,000 bpd in mid-July 2017, a fall of more than 300,000 bpd from July 2016. The U.S. has begun importing larger amounts of Iraqi oil as a result of the Saudi cuts.