Saudi Oil Output Rising Amid Fight for Market Share

[Wiljor]

Saudi Arabia is boosting oil production, pursuing its policy to maintain market share as prices fall.

Crude oil output is about 10 million barrels a day, New York-based Pira Energy Group said in a weekly report, citing discussions with Saudi customers. That would be the highest since July and up from an average of 9.7 million barrels a day in the second half of 2014, according to data from the Joint Organisations Data Initiative, an industry group supervised by the Riyadh-based International Energy Forum.

Saudi Arabia, the world’s largest crude exporter, led the Organization of Petroleum Exporting Countries’ decision in November to maintain its output target to preserve market share, rather than cut supply to boost prices. The fastest U.S. crude production in three decades helped trigger a global glut that pushed oil prices about 50 percent lower in the past year.

“Saudi Arabia’s oil policy has firmly moved to protect its market share,” Christyan Malek, London-based analyst at Nomura International Plc, said in a report. “There is even tail-event risk that the kingdom chooses to increase production to ensure that this is the case, thereby placing a cap on the recovery in medium-term prices.”

Brent oil futures have trimmed gains this year of as much as 9.1 percent to 2.2 percent. Prices fell 3.2 percent today to $58.58 a barrel on ICE Futures Europe.

New Refineries

Saudi Arabia is keeping production high as it processes more crude at two refineries it started last year and burned more oil to generate power.

Local refineries processed 2.22 million barrels a day in December, the highest in any single month since at least January 2002, according to JODI data.

Saudi Aramco, the state-run oil company, and partner Sinopec Group started a refinery last year at a plant at Yanbu on the Red Sea. It will have crude-processing capacity of 400,000 barrels a day. The company, along with partner Total SA of France, built a refinery of the same size at Jubail on the Persian Gulf. That plant, known as Satorp, had been running at full capacity since Aug. 1, Total officials said Sept. 23.

Saudi Arabia burned crude to generate power last year at the highest daily rate since 2009, when JODI started reporting the data. About 553,000 barrels a day of crude were burned on average by the nation last year, compared with 483,000 barrels a day in 2013, JODI data showed.

http://www.bloomberg.com/news/articles/2015-02-19/saudi-arabia-oil-production-rises-to-about-10-mln-b-d-pira