Saudi Arabia may have agreed this week to an American request to provide a training ground for moderate Syrian opposition forces to fight Islamic State militants, but another move it's made is not likely to be met with enthusiasm by American consumers.
The world’s biggest exporter of oil, Saudi Arabia has cut its production of crude oil in what business reporters are interpreting as an effort to keep prices close to $100 per barrel.
With this move, the oil-rich kingdom continues a policy characteristic of the OPEC cartel, which often artificially manipulates the price of oil by increasing or slashing production, as opposed to market forces dictating the price at the pump.
Reuters reported:
Top oil exporter Saudi Arabia told OPEC it reduced its oil output in August by 400,000 barrels per day, a cutback coinciding with a drop in oil prices towards the kingdom's preferred level of $100 a barrel.In a monthly report issued on Wednesday, the Organization of the Petroleum Exporting Countries said Saudi Arabia reported August production of 9.597 million barrels per day (bpd), down from 10.005 million bpd in July.
Britain’s Telegraph newspaper noted that Saudi Arabia has the capacity to pump 12.5 million barrels per day of crude, far higher than what it is now pumping as reflected in OPEC’s report.
Mike Wittner, head of oil market research at Societe Generale SA, told Bloomberg News, “It does illustrate a desire not to oversupply the market, and it does illustrate they are actively defending $100 a barrel.”
The Telegraph described the Saudi move as “an ominous sign for motorists in the U.K. who were hoping that recent declines in the cost of a gallon of petrol would be sustained.”
