Home Industry Energy Saudi Unlikely To Cut Oil Supply Despite oil prices falling below $100 a barrel, Saudi Arabia will not cut supplies anytime soon, say experts. by Reuters June 3, 2012 Oil’s fall below $100 a barrel is unlikely to trigger a swift supply cut from OPEC power Saudi Arabia, which is pumping at its highest rate in decades, because its budget can comfortably withstand a much lower price. Others in the Organisation of the Petroleum Exporting Countries(OPEC), including Iran and Iraq, need a higher price than Saudi Arabia to balance budgets and they may call on Riyadh to throttle back when producers meet on June 14 to set output policy. Having campaigned aggressively to bring down oil prices that were damaging global economic growth, Saudi Oil Minister Ali al-Naimi may be reluctant to turn down the taps just yet. “If prices come down very severely before the meeting, there could be discussion of a cut,” said a Gulf OPEC delegate, who declined to be identified. Brent crude would have to drop below $90 a barrel to convince Riyadh and its Gulf Arab allies Kuwait and the UAE of the need to consider curbing supplies, the delegate said. Naimi began talking oil prices down in March as Brent crude moved toward a peak of $128 a barrel, lifting output to back his words. Brent traded down around $3.00 to below $99 a barrel on Friday. With the United States, the UK and France threatening to release emergency stocks, Riyadh pushed output beyond 10 million barrels a day for the first time in 30 years. Talk of an emergency reserve release by consumer countries has since gone quiet and Riyadh is unlikely to want to provoke it again ahead of US presidential elections in November. HUGE RESERVES Saudi Arabia has huge foreign currency reserves and will be shielded by surpluses built up from high prices for the year to date. Brent so far in 2012 is averaging $117 a barrel, up from 2011’s $110, which was a record high. For Saudi Arabia and its Gulf allies, $100 is more than adequate to support budget requirements. Saudi’s breakeven price is around $70-$80, according to bankers and analysts, and Kuwait’s is among the lowest in OPEC at $45-$55. “$100 is a very comfortable price for our budget,” Saudi Finance Minister Ibrahim Alassaf said last week. Riyadh shows no sign yet of reducing output despite surplus supplies. Global output is now outpacing demand by about 1.5 million barrels daily on the 90 million bpd world market, Naimi said recently. Oil at $100 is “great”, he said in Australia in mid-May. But it’s not so great for those in OPEC whose budgets are strained by oil below $100. Iran, Iraq, Algeria and Libya are among the most exposed, according to the International Monetary Fund and they need oil prices in triple digits to stay in the black. Iran in particular will feel the pinch. Tehran requires $117 to balance the books, according to the IMF, and has seen oil production and revenue sunk by Western sanctions directed against the country’s nuclear programme. Production may fall further when a European Union oil embargo takes effect on July 1. Iran is fuming over the rise in Saudi output that has cushioned the impact for consumers of the US and European measures and could press its case at OPEC. “Iran is not happy about the high level of OPEC production- specially from Saudi Arabia,” an Iranian oil source said last week. Tags Breaking News World 0 Comments Share Tweet Share Share You might also like Global downturn risks becoming prolonged recession – WEF How should regional businesses effectively navigate their workforce through the Covid-19 pandemic Warmest oceans on record add to hurricanes, wildfires risks Is coronavirus the newest threat to cybersecurity in the GCC?