The kingdom ramped up oil output in June despite failing to persuade other OPEC members to follow suit. But analysts say it is only a matter of time before it cuts production following a slowdown in demand Leading OPEC producer Saudi Arabia has left supply to Asian and European customers unchanged in September despite a heavy fall in oil prices in the past week as global economic growth slows. Industry sources and traders told Reuters the kingdom would supply the same volumes of crude to its customers in Asia and Europe under term contracts in September. Analysts said it was only a matter of time before Saudi had to cut production as demand for its oil slows. "We are seeing the same volumes," said a major customer in Europe on condition of anonymity. Two buyers in Asia said they received unchanged volumes. "We are in line with our usual request," said a second big European customer. "This was decided when prices were higher so I don't think there will be any consequences in September." Oil prices at just over $101 for Brent, down from nearly $120 just 10 days ago, are not far from levels where Riyadh may need to act. Saudi Arabia's break-even budget price is $95 per barrel this year and $85 next year, according to Wall Street bank Merrill Lynch. OPEC's June output hit its highest since the full onset of the financial crisis in October 2008, according to Reuters estimates , lifted by increased production from Saudi Arabia. The kingdom ramped up output despite a failure to persuade fellow members to do the same at a meeting in early June and amid calls from industrialised nations to provide more barrels to help bring oil prices down and protect a fragile recovery. Saudi Arabia is believed to have trimmed very little if any of its output in July despite being angered by a shock release of emergency stockpiles by the industrialised nations at the end of June. Last month, the IEA, which advises 28 industrialised countries, decided against making a second release, saying extra supply from OPEC and the IEA reserves had made the market outlook more comfortable. A source familiar with Saudi allocations said it should come as no surprise that allocations won't change in September. "Everybody was debating if $120 was the right price for oil in the first place. Now the price is simply reflecting the world's supply and demand fundamentals more realistically," he said. But analysts at Merrill Lynch said that like Saudi Arabia other key Middle East and OPEC producers now had much higher budgetary needs than in previous years, which could help them quickly find a compromise on output cuts. "While many Middle East countries hold large foreign assets and could afford lower prices, we still believe that any pullback in Brent below $80 per barrel would trigger a substantial output reduction," Merrill said this week.
