The report of “Reg Zone” International noted that Saudi Arabia is dealing in a balanced and insightful way with the current trend among producers, to increase production and compensate for the decline in world oil supplies, especially in light of the crisis of production in Iran, Venezuela and other producing countries.
The report pointed out that the increase in production which started in Saudi Arabia will be accurate and calculated, so as not to lead to depletion of spare capacity.
According to analysts, the extent to which Saudi Arabia will increase its production to compensate for shortages elsewhere in the market will be carefully studied, and is in the interest of market stability, supply and demand balance, and maintenance of spare capacity.
Various market analysts pointed out that large quantities of barrels will be returned to the market in the coming months, more than one million barrels per day, but this will not lead to an exhaustion of Saudi Arabia’s large production capacity. The report also said that Saudi Arabia has the capacity to maintain the market in a state of comfortable abundance.
Saudi Arabia also has an additional production capacity of 2 million barrels per day, which means a total production capacity of about 12 million barrels per day, according to the report. In the case of a full usage of this energy, analysts predict that it will alone be enough to keep markets in a state of abundance, with prices kept under control.
The report expressed concern that increased production of this magnitude could eliminate the bulk of the remaining spare capacity globally, which could reduce the ability to deal with market developments in the event of a shock or a new crisis in supply of crude oil.
The price of crude oil began trading on a decline this week, due to increases in production by Russia in accordance with OPEC’s decision of an additional one million barrels per day. Concerns have eased relative to supply, with further expectations of a return to supply oversupply in the light of significant increases in output from major OPEC producers and beyond. In this context, experts say that prices have declined in response to the consensus of producers and consumers on the need to increase oil supply, and compensate for sharp declines in the production of several influential countries, led by Venezuela, Iran, Canada, Angola and others.
The report pointed out that the return of sanctions on Iran and the exacerbation of political and economic turmoil in Venezuela dominate the market at the current stage, but there is also a state of instability and fears of frequent interruptions in supplies in countries such as Libya, Iraq and Nigeria. The report also stated that the OPEC-led cut-off agreement had had a positive overall impact on the market over a year and a half before it was eased at the producers’ meeting in Vienna in June.
In terms of prices, crude futures for Brent crude fell $1.49 to $73.84 a barrel, while US light sweet crude was down $1.15 to $69.86 a barrel.
In the United States, official data for Baker Hughes oil services showed stability of drilling and drilling platforms in the country last week, with little change in the total of 863 platforms, the highest level since March 2015. Thanks to the high drilling activities, the US production skyrocketed more than 29% since the middle of 2016, to a total of 10.9 million barrels per day, close to Russia’s production of 11.1 million barrels per day.