Saudi Arabia has cut oil output to its lowest in almost two years, its energy minister said today, as the world's largest oil exporter leads OPEC's drive to eradicate a global glut and prop up prices.
Energy Minister Khalid Al-Falih said output had fallen below 10 million barrels per day (bpd) – more than it had promised as part of a global output cut deal between OPEC and non-OPEC producers.
Such low levels were last seen in February 2015, when Riyadh began to steeply raise production to deal a blow to US shale oil producers, effectively becoming the architect of a prolonged oil price crash.
Al-Falih, speaking at the Atlantic Council Global Energy Forum in Abu Dhabi, said output was "not significantly below" 10 million bpd currently and the Kingdom planned to make even deeper cuts in February.
This means Saudi Arabia has cut oil production by more than the 486,000 bpd it agreed to late last year under a global deal to curb production and stem a fall in oil prices.
Al-Falih also said he expected the oil market to tighten in two to three years, aided by the agreement of OPEC and non-OPEC producers late last year to curb production.
"We have been moving towards rebalancing the markets for some time," Al-Falih said.
"Even better, the pace of rebalancing will be accelerated by recent production agreements within OPEC and outside. I have confidence in these agreements to bring stability to the global markets." Al-Falih predicted oil demand would grow by over 1 million barrels a day this year.
"I am confident that the combination of capping production by 25 countries and growth of demand will continue to balance and prices will respond accordingly," he added.
OPEC and non-OPEC producers last month reached their first deal since 2001 to curtail oil output jointly by nearly 1.8 million bpd to help stem a fall in oil prices and ease a supply glut.
While Al-Falih said he did not have a specific oil price target, Iraqi oil minister Jabar Ali Al-Luaibi told reporters at the same event Iraq wanted to see prices of around $65 a barrel.
Brent crude prices were up 77 cents at $55.87 a barrel by 1230 GMT.
Al-Luaibi said Iraq had slashed its exports by 170,000 bpd and was cutting them further by 40,000 bpd this week. He said Iraq was committed to the success of the production-cut agreement "even though it should have been exempted."
An increase in prices would help Iraq, but the reduction in exports will mean that it could stand to gain very little from the agreement that primarily benefits neighbouring Iran, largely seen as a key player and power-broker in Iraqi politics.
OPEC expects global oil inventories to fall by the second quarter of this year in response to the agreement, OPEC Secretary-General Mohammed Barkindo said.
Kuwait has cut its oil exports by more than 133,000 bpd mainly to customers in North America and Europe while maintaining full exports to Asia, Kuwaiti Oil Minister Essam Al-Marzouq said.