Saudi cuts oil output in May to at 9.8 million bpd: source

DUBAI (Reuters) - Top oil exporter Saudi Arabia pumped 9.8 million barrels per day (bpd) of crude oil in May, an industry source said on Saturday.

OPEC on Wednesday trimmed its forecast for global growth in oil demand in 2013, becoming the second of the world’s closely watched oil forecasters this week to predict weaker consumption. The move by the Organization of the Petroleum Exporting Countries in a monthly report follows a similar downward revision to oil demand growth in 2013 by the U.S. Energy Information Administration on Tuesday.

Iraq is sharpening a push to sell its swelling crude output and sit at oil’s top table with Saudi Arabia, sweetening terms for contract buyers next year, its customers say. Iraqi Oil Minister Abdul-Kareem Luaibi held court to oil executives in Vienna’s Hotel Imperial last week on the sidelines of an OPEC meeting. Some buyers have said they were concerned by higher prices and variable quality.

One of the key questions in assessing the effect of the Libyan conflict on world oil prices was the extent to which an increase in Saudi production would offset some of the lost output from Libya. Now we know the answer, and it's not reassuring. Back on Feb 25, Reuters reported what sounded like some favorable indications:

Brent crude oil rose more than $1 to a 12-week high on Thursday after news of a sharp cut in Saudi oil production, an explosion in Yemen that halted most of the country’s oil exports and bullish Chinese trade data. Saudi Arabia cut its crude oil production by around 700,000 barrels a day (bpd) over the last two months of last year, with December output at around 9.0 million bpd, an industry source familiar with Saudi oil policy said.

Venezuela could boost its long stagnant oil output considerably in just five to seven years if it offers investors greater certainty over contracts, an executive of Russia’s LUKOIL said. Under president Hugo Chavez, who died on Tuesday after 14 years in power, foreign oil companies in Venezuela, the world’s 11th largest crude exporter, have faced price controls and currency devaluations along with threats of nationalisation.

OPEC’s likely decision to leave quotas unchanged next week belies the growing prospect of having to make the deepest oil-production cuts since 2009 as a global supply surge threatens to weaken prices. The Organization of Petroleum Exporting Countries may need to lower output by 1 million barrels a day, or 3%, in the first half of next year, according to Societe Generale SA. Brent crude may drop 20% by June if the group doesn’t reduce the amount it pumps, the Centre for Global Energy Studies said.

Worldwide shale oil production could add $2.7-trillion to the global economy annually by 2035 by slashing the price of crude by as much as $50 a barrel, PwC said on Thursday. Shale oil production could surge to 14 million barrels per day, or as much as 12 percent of total oil output from around 1 percent now, as it expands from its U.S. base over the next two decades, the world’s largest accounting firm said in a report.