Deviating from the Organization of Petroleum Exporting Countries’ efforts to jack up the price of oil, Saudi Arabian Oil Company, commonly known as Saudi Aramco, offered Asian customers a discount on its light crude exports for the first time in three months, Reuters reported Friday, citing “trade sources.” The price cuts, one of which stood at 75 percent, came as the state-run oil company has begun taking steps toward launching what would be the largest-ever initial public offering on Western stock markets in the next year.
Saudi Arabia was a key architect of the November OPEC decision to cut its production by 1.2 million barrels per day, or 4 percent, as a means of bumping prices back up after a long-term drop, which started in mid-2014, put a dent in the economies of oil-rich nations.
The price of Brent crude, an international indicator, fell more than 2 percent this week, recovering slightly Friday to a level of $55.61 per barrel. Meanwhile, OPEC’s basket price, an index of prices from its 13 member states, dropped about 0.8 percent to $53.69 per barrel between Wednesday and Thursday, the cartel announced Friday. As part of its attempt to push prices toward the $60- to $70-per-barrel range, OPEC established a monitoring committee of both members and non-members meant to enforce commitment to promises that those countries made to scale back production. The committee was set to meet in Kuwait near the end of March.
OPEC has historically had trouble achieving its price-gouging goals. Of the 17 times the group colluded to reduce its production, output has decreased, on average, by 60 percent of the desired amount, a Wall Street Journal analysis found.
The cartel also faces a challenge from U.S. producers, who have lately flooded the market with supply. Weekly U.S. inventories rose by 1.5 million barrels in the week ending Feb. 24, according to data from the Energy Information Administration, reaching 520.2 million barrels—“above the upper limit of the average range for this time of year.” And American companies have not shied away from what remained relatively low prices. The number of drilling rigs increased 91 percent over the past nine months, to 602, Bloomberg reported this week, while production recently toppled 9 million barrels per day for the first time in about 11 months.