NEW YORK — Saudi Arabia’s still the boss when it comes to oil.
Prices sank 2.5 percent Friday on reports that the world’s biggest oil exporter will increase production 13 percent from May levels to 10 million barrels per day. The move, reported by a Saudi Arabian newspaper, comes just days after OPEC snubbed its request to raise production quotas. Analysts see it as a bold step by the Saudis to reassert their dominance over the cartel.
“They’re reminding everyone who the sheriff is in town,” independent analyst Jim Ritterbusch said.
Benchmark West Texas Intermediate crude for July delivery lost $2.51 at $99.42 per barrel in midday trading on the New York Mercantile Exchange.
If Saudi Arabia makes good on the new production level, it will pump into the market another 1.14 million barrels per day above May levels. That will come close to covering a shortfall in global oil supply expected in the third quarter. OPEC says world demand will exceed supply by 1.45 million barrels per day in the third quarter. The U.S. Energy Information Administration puts the shortfall at 1.81 million barrels per day.
Saudi oil ministers had called for higher production from OPEC members. But its attempt to boost quotas was rejected by Iran and several other countries.
Friday’s report in al-Hayat newspaper gave investors a glimpse at how the Saudis will respond.
“They’re going to unilaterally decide for themselves when to supply the market,” analyst Andrew Lipow said.
Saudi Arabia, the only country in the world that can significantly increase oil production quickly, already exceeds its OPEC quota, analysts said. The Saudis previously said they were ready to supply even more oil if the world needed it, but analysts wondered if they would do that, given recent increases to Saudi domestic spending.
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