Saudi Oil Minister Suggests Kingdom's Output Reaches a Record

(Bloomberg) -- Saudi Arabia is producing oil in excess of 10.7 million barrels a day, more than in recent years, Energy Minister Khalid Al-Falih said, giving the strongest indication yet that the kingdom has boosted output to record levels.

At the same time, the world’s biggest exporter will respond to demand for oil and won’t oversupply the market, he told reporters on Thursday at the mining complex of Wa’ad Al Shamal in northwestern Saudi Arabia. Demand for Saudi crude may be lower in January than in December, he said.

“We were at 10.7-something in October, and we are above that. We will know exactly when the month is over,” Al-Falih said. “We will not flood the market. We will not send oil that customers don’t need. And we’ve started doing that in December, and I expect we’ll continue doing that into the new year.”

The Organization of Petroleum Exporting Countries and allied producers warned earlier this month that oil markets will probably be oversupplied in 2019. Concerns that slower economic growth and a trade war could erode demand for oil are outweighing fears of potential shortages caused by U.S. sanctions on Iranian exports and supply disruptions elsewhere. Crude jumped to more than $85 a barrel in October before tumbling into a bear market this month. Benchmark Brent was trading near $63 a barrel in London on Thursday.

Vienna Meeting

Saudi Arabia set an oil production record of 10.72 million barrels a day in November 2016, just before the kingdom led a group of OPEC and non-OPEC countries in cutting output.

The surge in output this month will come into the spotlight when producers meet on Dec. 6 in Vienna to discuss their 2019 output strategy. Riyadh has already indicated it supports a deep production cut and as a first step will reduce its shipments by 500,000 barrels a day in December from November levels.

“As the year comes to an end, customers tend to cut their liftings,” Al-Falih said. “And of course we’ve seen the waivers on the Iranian sanctions. So, for all we know, January demand from Saudi Arabia will be even lower.”

Middle Eastern crude producers face a stiffening challenge from U.S. shale oil. The International Energy Agency, an adviser to wealthy nations, sees inventories continuing to build in the first half of 2019 as America adds millions of barrels of new production. Saudi Arabia, Russia and the U.S. are all pumping at or near record amounts as each seeks to protect its share of the market and win customers.

“It’s not in anybody’s interest to flood the market and to create a glut similar to what we saw three years ago that resulted in the downturn that hurt the global economy as much as it hurt producers, companies and countries,” Al-Falih said. “And many of those companies are in the U.S. Everybody’s interest is in our mind.”

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