According to Khalid al-Falih, Saudi Arabia’s energy minister, OPEC production cuts are improving crude prices in the Kingdom. But as the nation decides if it wants to extend its cutback promise beyond this summer, it’s eyeing the success others, like the U.S., have made in offsetting their own OPEC cuts.
Collectively, OPEC members account for roughly one-third of global oil output. OPEC members, in addition to many non-OPEC members, agreed in Jan. 2017 to cut their oil production by 1.2 million barrels a day. Most producers have met the goal. But some, like Russia, have missed the target mark.
Within this context, al-Falih is eyeing the success of U.S. oil producers in pumping oil from shale formations. Based on U.S. Energy Department numbers, U.S. production averaged 8.9 million barrels a day in 2016. The U.S. is predicted to reach 9.7 million barrels a day by 2018.
As the world’s largest oil producer, Saudi Arabia carries the heaviest load of production cuts. As Saudi Arabia actively diversifies its economy under its ambitious Vision 2030 program, the nation needs a steady stream of revenue to ensure social programs, among other in-country service, remain funded. Opportunity lies in Saudi Aramco’s pending IPO. As al-Falih noted, the public offering will better embed the state-owned company into the international economy.
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