Top oil exporter Saudi Arabia has already cut significantly crude supplies to some of its customers, industry sources said on Tuesday, quelling doubts Opec would stick to its latest output deal. One industry source estimated Saudi Arabia had reduced exports, as opposed to production, by around 900,000 barrels per day (bpd) compared with a peak in August. Saudi officials have yet to comment publicly.
The latest instalment of the cuts removes oil from November deliveries to long-term customers, the sources said. "We had a number which we found to be quite substantial," a source told Reuters with reference to the reduction. He added that with continued cuts expected in December, supplies could become very tight especially for some grades. "From what I saw, the Saudis did cut in November," said another oil executive.
The cuts were not universal, however, as state oil firm Saudi Aramco told at least two Asian refiners November supplies would remain unchanged, company sources said. The Organisation of the Petroleum Exporting Countries agreed at an emergency meeting last month to lower its output ceiling by 1.5 million bpd or roughly 5 percent.
It had already said the month before it would take away around 500,000 bpd pumped above its agreed target. According to a Reuters survey of Opec production, in practice the group lowered output by roughly 300,000 bpd in September and by just over 100,000 bpd more in October.
Saudi Arabia's production has fallen from around 9.65 million bpd in August to 9.4 million bpd in October, the Reuters survey found. Allowing for around 2 million bpd of domestic consumption, the kingdom exports more than 7 million bpd. Immediately after Opec's emergency talks on October 24, oil prices fell to below $62 a barrel, less than half the July peak of $147.27. In its latest report, Lloyd's Marine Intelligence Unit said crude shipments from Opec producers in the Gulf dropped by 560,000 bpd in the four weeks to the middle of October.
Other Opec members have been more public than Saudi Arabia in announcing their intentions to curb supplies. The United Arab Emirates, Kuwait, Iran and Nigeria told customers of immediate cuts last week. The reaction of some customers was that they did not need the oil following lower demand, but other sources and analysts have predicted Opec could be reducing supplies too deeply, especially when non-Opec production is taken into account.
The biggest non-Opec exporter Russia is facing its first annual decline in production for a decade. Barclays Capital calculated Opec needed to cut by 1.96 million bpd to bring output in line with its new target of 27.3 million bpd. Of this, Saudi Arabia would need to lower its production by one million bpd. Global companies are estimated to buy about 2 million bpd of the oil the kingdom exports.