Saudi Arabia may cut oil production to balance oil prices

Industry analysts believe that due to the balance of fiscal budgets and the recent sharp fall in international oil prices, Saudi Arabia may reduce oil production to balance oil prices.

Sinopec (7.20,0.00,0.00%) News Network August 16 News Analysts from Sanford C. Bernstein & Co., an American-based investment bank and market research firm, believe that Saudi Arabia needs oil prices of at least US$85 per barrel. To pay for its expenses, Saudi Arabia may begin to cut its oil production more quickly than it cuts oil production after the 2008 financial crisis.

Analyst expert Oswal Clint of Sanford C. Bernstein & Co in London said in a report that Saudi Arabia’s 2011 budget is estimated to have earned 144 billion U.S. dollars and expenditures have increased by 7.4% to reach 154 billion U.S. dollars, indicating that 65 U.S. dollars per barrel is Saudi Arabia. This year's budget has reached a balanced oil price.

Clint said that Saudi’s announced extra spending of $36 billion in February raised the breakeven price by $20 per barrel.

On August 12, WTI oil prices fell 0.8% per barrel on electronic trading on the New York Mercantile Exchange due to concerns about the European debt crisis and further deterioration of the US economic slowdown. It fell to US$85.03 a barrel and fell for the third consecutive week. Crude oil trades fell to $75.71 a barrel last week, the lowest level in the past 10 months.

According to Clint, Saudi Arabia’s daily oil exports dropped from 10 million barrels in September 2008 to the lowest point of 6 million barrels when oil prices fell to 40 dollars per barrel in late December 2008.