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Saudis is planning new export reductions hoping to raise oil to $ 80 a barrel




Saudi Arabia plans to cut crude exports to around 7.1 million barrels a day by the end of January, hoping to lift oil prices over $ 80 a barrel, according to OPEC officials.

The new strategy comes as the kingdom seeks to cover a large government spending boost. It said last month it was planning to increase its spending by 7% by 2019, equivalent to $ 20 billion, as the country is struggling to fund ambitious plans to diversify its economy beyond petroleum products.

Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, has faced a sharp decline in oil prices since October during a supply liquor. The brutal killing of journalist Jamal Khashoggi by the Saudi operators in October has also deterred foreign companies from working in the kingdom and investing in their economic development plans.

The new Saudi budget requires oil prices to rise to as much as $ 95 a barrel, according to an official with the organization of the petroleum exporting countries. But the realm would be pleased with the prices of $ 80 to $ 85 a barrel, an area that would limit the need to dip it into its financial reserves, according to people familiar with their thinking.

To cover proposed expenses, Riyadh is set to reduce crude exports by up to 800,000 barrels per day from the November level.

Saudi Arabia exported about 7.3 million barrels a day with raw last month. It was already down from around 7.9 million barrels a day in November and 7.7 million barrels a day in October.

According to an OPEC official, the US market will see the largest reduction in Saudi oil exports. Overall, export deliveries will go beyond OPEC's six-month commitment in early December.

At an OPEC meeting last month, Saudi Arabia agreed to reduce its production by 2.5% from the October level from January. Later, his goal upgraded to 3%. But the planned reduction in shipments, the most important part of the supply, because it affects global oil markets, will reduce exports to 7.8%.

OPEC is struggling to convince the markets that it can stabilize oil prices. WSJ's Sarah Kent takes a look at the current state of the cartel's power.

Oil prices fell below $ 80 a barrel in October after Saudi Arabia showed up the tigers in response to US pressure to replace sanctioned Iranian oil. The increase turned out to be more than the market needed.

OPEC's officials said the new effort will not raise prices to a level that Saudis requires in the short term. They said that $ 80 a barrel of oil could be possible in the second half of the year when analysts expect an increase in oil demand.

Brent crude, the global reference level, rose 1[ads1].2% to just below $ 59 a barrel and WTI jumped 3.5% to just under $ 50 a barrel Monday after the Wall Street Journal reported Saudi Arabia planned to deepen export cuts .

Write to Benoit Faucon at benoit.faucon@wsj.com and the summer said at the summer.said @ wsj.com



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