Home' Trinidad and Tobago Guardian : March 16th 2017 Contents MARCH 16 • 2017 guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
Saudis tell OPEC they eased
cuts to pump 10 million barrels
Saudi Arabia told OPEC it raised
output back above 10 million
barrels a day in February, re-
versing about a third of the
cuts it made the previous
The kingdom boosted production by
263,300 barrels a day to 10.011 million a day,
according to a report from OPEC on Tuesday.
Oil prices sank on speculation the country
had grown impatient with fellow producers
lagging in their own cutbacks. Saudi Ara-
bia's Energy Ministry said that the volume
of crude supplied to markets nonetheless fell
by 90,000 barrels a day to 9.9 million, as
the extra supplies were moved into storage.
Even after the increase, Saudi Arabia's data
show it's cutting output more than required
under the terms of OPEC's Nov 30 agree-
ment. The kingdom remains determined to
stabilise the global oil market, according to a
statement from the ministry. Nevertheless,
Energy Minister Khalid Al-Falih warned last
week that the kingdom won't indefinitely
"bear the burden of free riders." Russia, Iraq
and the United Arab Emirates are yet to de-
liver all the curbs they promised.
"The Saudis are once again showing their
stern face, as they did in the days before the
OPEC meeting, and trying to get the laggards
to live up to their promises," said Helima
Croft, head of commodity strategy at RBC
Capital Markets LLC.
Crude in New York fell to the lowest since
the OPEC supply deal was first struck, sink-
ing as much as 2.7 per cent to US$47.09 a
barrel after the report.
Twenty-four oil producers, led by mem-
bers of the Organisation of Petroleum Ex-
porting Countries and Russia, agreed to
reduce output in an effort to clear a surplus
that has weighed on prices and battered their
economies. Crude slipped back below $50 a
barrel last week for the first time since De-
cember as surging stockpiles and production
in the US indicated the cuts aren't working
Speaking at the CERAWeek oil industry
conference in Houston last week, Saudi Ara-
bia's Al-Falih said the country hasn't decided
yet whether OPEC should prolong the curbs
once they expire in June.
At 10.011 million barrels a day, Saudi out-
put is still below the ceiling of 10.058 million
a day imposed by the agreement. The figure
submitted by Riyadh jars with OPEC's own
estimates, compiled from external sources
such as news agencies, which show Saudi
output falling by 68,100 barrels a day to
9.797 million a day.
That data set, referred to as "second-
ary sources," shows the 10 OPEC nations
required to reduce output were as a whole
fully implementing the agreement. Their
production in February was 1.39 million bar-
rels a day lower than the so-called reference
level, a compliance rate of 111 per cent. Saudi
Arabia was cutting significantly more than
obligated and there was better adherence
from Iraq and the UAE, OPEC estimated.
Taking into account output increases from
Iran, Nigeria and Libya---permitted under
the terms of the agreement---OPEC's total
output remains about 200,000 barrels a day
above the target set out in the Nov 30 deal.
That means the organisation was only about
85 per cent of the way toward the produc-
tion level it deemed necessary to eliminate
a global oversupply and boost prices.
Trump tax cut
may save oil
The Trump administration's plan to
slash corporate tax rates could free
up more than US$10 billion a year for
US oil explorers, opening new oppor-
tunities to boost drilling at a time of
uncertainty in the marketplace.
Crude prices in New York have fallen 10 per cent
since the end of 2016 as added drilling in America's
shale fields offset an OPEC-led drive to raise prices by
cutting production. The US push has spurred concern
that another price rout could be just around the corner,
following a two-year decline that saw prices fall as
low as US$26.05 a barrel in February 2016.
Republicans led by President Donald Trump have
said they want to cut the top corporate rate to 15 or 20
per cent, from 35 per cent now. That could mean more
than US$10 billion in savings for oil producers that are
one of the country's most-heavily taxed industries,
according to Bloomberg Intelligence research. The
final number will hinge on whether drillers surrender
other tax breaks in exchange, said Vincent Piazza, a
senior analyst at BI.
"In theory," explorers would divert tax savings to
more domestic drilling, Piazza said in a telephone
interview "But nothing is ever one-for-one."
The number of rigs drilling US fields for crude al-
most doubled to 617 since the end of May, when the
full impact of the oil-market collapse shrank the fleet
to a 6 1/2-year low, according to Baker Hughes Inc.
The oil rig count has advanced in 18 of the past 19
weeks as explorers coped with reduced cash flows
by finding cheaper ways to pump each barrel from
US drillers lifted crude production more than three
per cent since the end of 2016 to 9.088 million barrels
a day as of March 3, according to the Energy Depart-
ment in Washington.
It's not clear when a tax cut plan might be finalised
by the US Congress and signed into law by the presi-
dent. "A reform bill faces stiff challenges, and would
likely come with tradeoffs such as fewer tax breaks,"
the Bloomberg Intelligence report said.
Still, the discussion comes as the future of the
global industry is under debate. At CERAWeek by
IHS Markit, the largest annual gathering of industry
leaders, some top executives warned against overin-
dulgence by US drillers.
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