Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Saudi Cuts Boost Slumping Oil Prices

LONDON -- Saudi Arabia, the world's biggest oil producer, lent support to floundering prices Thursday by making fresh cuts in crude export volumes for September.

The news helped lift benchmark Brent crude by 28 cents to $12.05

per barrel at midday, half a dollar above a 10-year low of $11.55 touched Tuesday.

The move appeared to sharpen a so-far ineffective attack by the Organization of the Petroleum Exporting Countries on a glut that has drowned markets in unwanted crude and products like gasoline.

"The market has perhaps been getting overskeptical about OPEC's efforts," said Mike Barry of Energy Market Consultants.

"The Saudi move strengthens our view that the supply-demand bal-

ance is beginning to flatten out

and the year-on-year stocks surplus should start coming down from this month," he said.

Stocks are bulging and demand growth has slumped due to economic crisis in Asia, until last year the oil-hungry engine room of global energy market expansion.

Analysts said the Saudi move would bring the kingdom fully into compliance with its promise to slice 725,000 barrels per day from a February baseline of 8.748 million bpd.

Saudi Arabia had pledged to reduce output as the biggest contributor in an OPEC package of cuts totaling 2.6 million bpd coordinated with additional cuts by nonmembers like Mexico.

Based on Aramco exports earlier this year of some 6 million bpd, Saudi's September sales cuts, if applied to all customers, would amount to up to 1.1 million bpd.

Traders have expressed skepticism over the cuts by the famously quarrelsome cartel, and a Reuters survey pegged compliance to the end of July at only around 63 percent.

But traders noted that Saudi Arabia had signaled earlier this month that if OPEC showed good compliance in September and prices did not rise markedly in response, then it would consider making a third round of cuts before OPEC's conference in November.

Trading sources said state oil company Saudi Aramco informed crude customers in Europe and the United States of a reduction in contract sales amounting to about 18 percent for September.

Aramco clients in Japan were told of similar contract reductions, which follow an OPEC agreement in late June to extend output cuts in response to weak world oil prices.

"It's extremely pleasing news," said John Toalster at Societe Generale in London.

"We do need substantial additional cutbacks because the market is in desperate straits," he said.

That is an option apparently considered by Kuwait, where hawkish Oil Minister Sheikh Saud Nasser al-Sabah urged fellow producers to comply with cut pledges and called prices "troubling."

Sentiment drew support from news that the energy ministers of Mexico and Venezuela, key players in organizing a first round of output cuts in March, spoke by telephone Tuesday to commiserate over low prices.

A sign of the depth of the gloom engendered by oversupply came this month when prices failed to lift in response to a fresh standoff between Iraq and the United Nations Special Commission inspectors trying to dismantle Iraq's weapons of mass destruction.

Prakash Shah, special envoy of UN Secretary-General Kofi Annan, was due in Iraq on Thursday to discuss Baghdad's decision to halt cooperation with arms inspectors.