Opec kingpin Saudi Arabia said on Wednesday it would slash its oil exports by 800,000 barrels per day (bpd) in January and promised further cuts as producers move to shore up tumbling prices.
Minister of Energy, Industry and Mineral Resources Khalid al-Falih said the kingdom, the world’s top crude supplier, would cut its exports to 7.2 million bpd in January, down from 8.0 million bpd in November.
He also announced a further 100,000 bpd cut in February.
Benchmark Brent crude climbed back to $60 per barrel on Wednesday for the first time in several weeks following the Saudi announcement, which came as producers began implementing a new deal to trim output.
Opec and its allies decided last month to cut their overall output by 1.2 million bpd from January, to boost prices hit by a supply glut and fears demand could plummet.
Falih said Saudi production had fallen to 10.2 million bpd, down from the roughly 11 million bpd it was pumping when oil producers decided to end a production cut deal in May.
“We are serious about restoring balance to the market,” Falih told a press conference in Riyadh.
“We are concerned about volatility in the oil market,” he said. “We have seen peaks and drops in prices [that are] completely unjustified by the fundamentals.”
Brent crude had hit $85 a barrel in early October, but prices dived more than 40 per cent over the following two months on oversupply and fears a trade war between the US and China could slash demand.
They have partially rebounded in the past few days after a new deal came into effect, under which Opec and non-Opec oil producers agreed to trim output by 1.2 million bpd.
That figure is “more than sufficient to bring balance to the market”, said Falih, adding that the production cut would trim excess supply.
Members of Opec and their partners, who together account for around half of global output, have presided over a supply glut which had sent oil prices tumbling by more than 30 per cent between October and December.
Brent and the world’s other benchmark crude, West Texas Intermediate, both slumped late last year to 18-month lows of $49.93 and $42.36 per barrel.
But on Wednesday, Brent crude for March delivery hit $60, up 20 per cent on the figure two weeks ago, prior to a deal between Opec members and other major producers to cut output from January 1.
The kingdom also announced on Wednesday that its huge oil reserves, already the second largest in the world behind only Venezuela, are even bigger than previously thought.
The energy ministry said proven oil reserves stood at 263.2 billion barrels at the end of last year, up from the figure of 261 billion barrels that has been used for almost three decades.
The kingdom has another 2.9 billion barrels of crude in a border zone shared with neighbouring Kuwait, bringing total oil reserves to 266.1 billion barrels, the ministry said.
Natural gas reserves were also revised upwards from 8.56 trillion cubic metres to 9.19 trillion cubic metres, the ministry said.
It said the new figures have been backed by an independent third-party certification by leading consultants DeGolyer and MacNaughton.
Saudi Arabia, the world’s top oil exporter, is the third biggest crude producer after the US and Russia.
Falih said Saudi oil remains among the cheapest in the world to extract, at only $4 per barrel.
But the kingdom has posted budget shortfalls each year since a major 2014 crash in crude prices, and has turned to borrowing as well as pursuing economic reforms.
The kingdom on Wednesday raised $7.5 billion, half of the amount it plans to borrow this year, said HSBC, one of the banks involved in the operation.
It was the first time Riyadh has tapped international debt markets since the October murder of journalist Jamal Khashoggi, which tarnished Saudi Arabia’s public image. But demand was high, at $27 billion, according to HSBC.
The operation was not fully concluded, so the interest rates have not yet been calculated.