India Targets Saudi Investment in Building Strategic Oil Reserve

Daniel Fowler
March 12, 2019

The so-called OPEC+ alliance, including Russian Federation and other producers, agreed in December to reduce supply by 1.2 million bpd from 1 January for six months, which will help to boost oil prices after last year's downward trend.

Crude output in the United States will rise almost 2.8 million bpd, growing to 13.7 million bpd in 2024 from just under 11 million bpd in 2018, the IEA said.

The second consecutive month of deep production cuts shows the world's largest oil exporter is determined to re-balance the market more quickly even though events in Venezuela have left some refiners short of crude.

Oil prices rose on Monday, lifted by comments from Saudi Energy Minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing a fall in USA drilling activity.

However, OPEC member Iraq, which failed to observe its commitment to the organization several times in the past, is set to reinforce its position as one of the world's top producers, according to the IEA.

"Annual gains will boost the United States to levels never seen in any country, in excess of maximum capacity in both Russian Federation and Saudi Arabia", said the IEA in its five-year.

The story that has been underpinning prices is the OPEC-led supply cuts that have been trimming about 1.2 million barrels per day since January 1.

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IEA Executive Director Fatih Birol noted that the second wave of the "US shale revolution is coming", adding that the significant rise of US' share in global oil production and the gas trade "will shake up worldwide oil and gas trade flows, with profound implications for the geopolitics".

Saudi Arabia plans to cut its crude oil exports in April to below 7 million barrels per day (bpd), while keeping its output "well below" 10 million bpd, a Saudi official said on Monday.

"Ongoing trade disputes between major powers and a disorderly Brexit could lead to a reduction in the rate of growth of worldwide trade and oil demand", the IEA said in its medium-term oil-market report, which covers the period to 2024.

"The IEA continues to see no peak in oil demand, as petrochemicals and jet fuel remain the key drivers of growth, particularly in the United States and Asia, more than offsetting a slowdown in gasoline due to efficiency gains and electric cars", the IEA said.

The IEA forecasts demand for OPEC crude will drop in 2020 and then rise to average 31.3 million bpd in 2023.

Demand for OPEC crude will rise but given the growth expected from the United States and other non-OPEC producers, Saudi Arabia and its allies will probably have to maintain efforts to withhold supplies.

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