Last month Saudi Arabia pumped more crude than at any point since we started keeping track, setting a record at a time when an oversupplied market has pushed the global price of crude well below the level Riyadh needs to balance its budget. Bloomberg reports:
The world’s biggest oil exporter pumped 10.564 million barrels a day in June, exceeding a previous record set in 1980, according to data the kingdom submitted to the Organization of Petroleum Exporting Countries. The group sees “a more balanced market” in 2016 as demand for its crude strengths and supply elsewhere falters […]OPEC’s 12 members raised production by 283,200 barrels a day to a three-year high of 31.378 million a day last month, according to external estimates of output cited by the report. This data included a lower figure for Saudi production of 10.235 million barrels a day.
The price of crude is roughly half of what it was a year ago. That’s in large part due to booming production from within OPEC, but also from without, as American shale firms have threatened to knock the world’s petrostates off of their perch. The Saudis have pushed an OPEC strategy of inaction, hoping to squeeze those fracking companies out of the game by keeping production high (shale plays are much more expensive to plumb than conventional fields). Indeed, the FT suggests that may explain why the Saudis are keeping output so high, reporting that “Riyadh has said it wants market share to shift back to countries with the cheapest production.”Meanwhile, we just learned that the country borrowed $4 billion over the past year to help cover its growing budget deficit. Saudi Arabia has set OPEC on a collision course with American shale, but it isn’t clear who’s going to blink first in this game of chicken. The fracking industry is finding new ways to cut costs and stay profitable even at today’s bargain prices. Meanwhile, OPEC member states are running deep into the red as they struggle to adjust to the bear market. For the U.S., the oil price decline challenged the industry to trim the fat and innovate anew; for the world’s petrostates, that plunge is threatening the finances of ruling regimes.