Demand dip leads to Saudi output cut

New York: Saudi Arabia cut oil production to 9.1 million barrels per day in April due to a drop in refinery demand, not a desire to lower stock levels, The Wall Street Journal yesterday quoted Oil Minister Ali Al Naimi as saying.

After the Opec meeting in Caracas, Al Naimi said other members are having trouble finding buyers for all their crude at a time when global storage is near full and many refiners have closed for routine maintenance, The Wall Street Journal said. "It's not just heavy oil. Even light oil is having problems" finding buyers.

He denied Saudi Arabia was easing up on production because of concern about a build-up of inventories in the United States and other importing countries, suggesting producers will sell all the oil they can at $70 a barrel.

Despite healthy US stock levels, Opec agreed last week to keep output levels steady in hopes of eventually taming high prices they fear could stunt global economic growth and damage long-term oil markets by making alternatives more affordable.

Al Naimi said Saudi Arabia pumped 9.1 million bpd in April lower than many observers had initially estimated suggesting the kingdom has more spare capacity to deal with peak summer demand or meet unexpected outages.

He did not give an estimate for production in May or say how much the world's biggest exporter intended to produce in June.

A Reuters survey of industry and Opec sources put Saudi output in April steady at 9.45 million barrels. Unusually heavy refinery maintenance in Japan and the United States this spring may have cut second-quarter crude demand by more than usual this year, analysts have said.

An estimated three million barrels a day of refining capacity is idled, the WSJ said, citing a Saudi official. He also ruled out the idea that Saudi Arabia is discounting its oil to sell more, saying "we will not leave money on the table" for others, the newspaper said.

On Friday, in an interview with the Al Hayat daily, Al Naimi had said today's market fundamentals did not support a price above $50 a barrel.