Saudi Arabia has told OPEC that it will not play sucker to countries that won’t meet OPEC’s targets for production cuts. Russia, Iraq, and the United Arab Emirates have not yet delivered the production cuts they agreed to.
Saudi Arabia has said that it raised production back above 10 million barrels a day in February. That reverses about a third of the cuts it made the previous month. Even after the reversal, though, Saudi Arabia has still cut output more than required by OPEC’s November 30 agreement.
The oil market, though, is reacting only to the addition of 236,300 barrels a day to Saudi production. As of 11: 45 a.m. New York time West Texas Intermediate crude had fallen 1.63% to $47.61 a barrel and international benchmark Brent crude was off 1.11%to $50.78 a barrel.
And to the fear that the Saudi move is just a preliminary step to an end to the OPEC production deal, perhaps before the scheduled June end of the agreement. Certainly it’s hard to see this action as raising the odds for an extension of that agreement. Kuwait’s oil minister has warned that oil could fall to $45 a barrel.
Speaking at the CERAWeek oil industry conference in Houston last week, Saudi Arabia’s energy minister said the country hasn’t decided yet whether OPEC should prolong the curbs once they expire in June.
A five-nation committee established to review compliance with the output cuts will meet on March 25 to 26. OPEC itself will meet on May 25 to decide on whether to extend the accord.