Saudi Arabia will need to keep cutting oil output to sustain prices above $100 a barrel, even after the kingdom’s largest reduction in two years, according to BNP Paribas SA and Societe Generale SA.
The world’s biggest crude exporter told OPEC last week it pumped 408,000 barrels a day less last month, about as much as Australia produces. Output rose in Iran, Iraq and Nigeria, adding to supply that drove benchmark Brent crude futures below $100 this month for the first time since June 2013. Saudi Arabia probably will have to cut a similar amount again to stabilize prices, the banks said.
Global oil demand growth this year will be the weakest since 2011, just as the US shale boom means oil production from countries outside OPEC rises by the most since the 1980s, according to the International Energy Agency. The glut is prompting most of OPEC’s Middle Eastern members, including Saudi Arabia, to cut prices to customers.
Brent crude traded at less than $99 a barrel today in London, compared with a range of $95 to $110 described as “fair” by Saudi Oil Minister Ali Al-Naimi at a meeting of the Organization of Petroleum Exporting Countries (OPEC) in June.
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