DUBAI - The world??s top oil exporter slashed its oil production by nearly 5% in December, representing Saudi Arabia??s "deepest production cut in almost three years, which comes amid expectations of lower demand for OPEC crude this year," write the Wall Street Journal.
The cut in crude production came largely in response to lower demand from Asian customers. The cut also sent the price of European benchmark Brent crude to its highest level since October and U.S. benchmark West Texas Intermediate crude to a near four-month high.
As demand for crude from OPEC members drops this year, Saudi??s cut in production shows that it, "still wants to have, and does have, the role as the swing producer in the market," Thina Saltvedt, a senior oil market analyst at Nordea Bank Norge, told the newspaper, which also notes that Saudi oil production fell to 9.025 million barrels a day in December compared with 9.49 million barrels a day a month earlier.
Meanwhile, Saudi??s cut doesn??t reflect a shift in its approach to supplying the oil market. The newspaper notes that Saudi Arabia has repeatedly stated its commitment to meet all requests for oil from customers in the last year.
"All of the numbers and the majority of analysts are all suggesting that as we go forward in the year the market is going to be significantly oversupplied," said Paul Stevens, senior research fellow in the energy, environment and development program at London-based independent policy institute Chatham House. "There is pressure for OPEC to anticipate this and cut back and I suspect Saudi Arabia has been quietly doing this in order to reduce oversupply."
Recent production data suggest other OPEC oil producers have also cut back. A survey of industry sources and analysts conducted by The Wall Street Journal two weeks ago found output from OPEC members fell in December 2012 to its lowest level since October 2011.
"Overall I think OPEC will keep things fairly steady after this recent reduction," Simon Wardell, research manager in the energy practice at IHS Global Insight, told the newspaper, adding, "They've probably reduced output as much as I think they need to at this stage."