Saudis Make a Major Reversal in Oil Output Commitments
Before OPEC made the decision not to increase the production cap on oil (NYSE:USO), Saudi Arabia had already vowed to increase their production by at least 500,000 barrels a day regardless of the results of OPEC’s meeting on Wednesday. Now they’re saying they’re ready to follow through on that promise. Leading Iranian newspaper Al-Hayat is resporting that Saudi Arabia will increase output from 8.8 million to 10 million barrels a day in July, an increase of 1.2 million.
OPEC, which accounts for 40% of the global oil supply, met in Vienna on June 8 to hear from oil (NYSE:USO) ministers from Kuwait, Qatar, the UAE, and Saudi Arabia about increasing production by 1.5 million barrels a day. At the end of the meeting, the twelve members of OPEC were unable to reach a consensus on quotas, with Iran and six other countries trying to block Saudi Arabia from increasing their production in order to replace lost output from Libya.
Saudi Arabia’s output already rose to 8.86 million barrels a day last month, the highest level since 2008. This month, supplies may reach 9 million barrels a day. While Saudi Arabia is the world’s largest producer of oil (NYSE:OIL), it would have to increase its output by 1.9 million barrels a day for the world’s oil needs to be met during the third quarter unless OPEC can come to agreement to let other countries share the burden.
While crude oil futures soared on Wednesday with news of OPEC’s decision, or rather, failure to make a decision, to over $101 a barrel, shares are down today 2.83% today to $99.05. Shares in the United States Oil Fund ETF (NYSE:USO) are down 2.67% today.