Saudi policy statement remains unratified
OREANDA-NEWS. An attempt by Saudi Arabia to clarify its production policy and market outlook ahead of an informal meeting of Opec ministers at the end of September has muddied the water after a statement released yesterday was recalled and overnight assurances that an approved version was imminent were not met.
Eyes will now be on whether the original document has been altered and, if so, whether the changes are substantive and whether they were made by oil minister Khalid al-Falih, or by deputy crown prince Mohamed bin Salman who oversees Saudi Arabia's economic policy and is also the country's defence minister.
The recalled document, in the form of a question and answer session with al-Falih, comprised a restatement of Riyadh's standing tenets: Saudi Arabia will sell as much crude as its customers want; Saudi Arabia believes the market share prioritization policy it has pushed Opec into adopting since November 2014 is working; Saudi Arabia does not rule out "action to stabilize the market" but only as long other producers participate.
The first point is firmly underlined in the recalled document. On 10 August, Saudi Arabia's self-declared crude output level for July was announced in Opec's monthly market report. It was an all-time high of 10.67mn b/d. Saudi domestic use rises in summer as it burns more crude to power air conditioning. And this summer has been particularly hot.
But rather than allow seasonal factors to explain the declared production increase, al-Falih emphasizes it was a response to increased demand from international buyers as well as domestic demand.
He is quoted as saying that supply to domestic users and international buyers of Saudi crude in August was actually higher than the country's output and stood at 10.75mn b/d with the balance met by a stock drawdown.
This part of the document can be read in two ways. On the one hand, it reiterates that Riyadh's priority is keeping its customers supplied even if that means ratcheting up output. On the other, by matching the output rise to actual demand, it says Saudi Arabia is not weakening prices. Indeed, the mention of a drawdown is a small sop to producers worried about unrestrained pumping.