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World's biggest exporter of oil reacts to slide in prices by trimming 400,000 barrels per day of output in August

Saudi Arabia, the world’s biggest oil exporter, has slashed its production of crude in an apparent attempt to prevent the price falling further below $100 per barrel.

The kingdom, which has the capacity to pump 12.5m barrels per day (bpd) of crude at full choke, trimmed 400,000 bpd from its output last month as prices began to weaken, according to a monthly market report issued by the Organisation of Petroleum Exporting Countries (Opec). That is equal to about half the UK’s total oil output at present levels.

Saudi is considered to be the world’s swing producer because it accounts for about 10pc of global demand. The country has acted on several occasions either to pump more oil into the market to ease price pressures, or cut back to maintain prices at levels around $100.

Opec has also cut its forecast for world oil demand and has warned of the risks if the 12-member group continues to pump at its current levels.

The largely Middle East group of oil producers, which meets regularly to agree on output quotas and is often accused of being a cartel, controls about a third of the world’s supply of crude.

However, the growth of US shale oil has challenged its market domination.

Both Saudi and Iran recently warned that declines in crude prices will be short lived. It is an ominous sign for motorists in the UK who were hoping that recent declines in the cost of a gallon of petrol would be sustained.

Iran’s Petroleum Minister Bijan Namdar Zanganeh said last month that the current weakness in oil prices, which have resulted in Brent crude falling by 13pc to below $100 per barrel, will soon be reversed.

"The downward crude oil price will not live long due to seasonal fluctuations,” Zanganeh was quoted as saying by an Iranian state news agency.

Zanganeh's remarks followed comments made by Khalid al-Falih, chief executive of Saudi Aramco, the world's largest state-owned oil company, which suggested that prices would have to remain around current levels to sustain enough investment to meet future demand.

"To tap these increasingly expensive oil resources, oil prices will need to be healthy enough to attract needed investments," al-Falih was quoted as saying at an industry conference by Reuters. "Long-term prices will be underpinned by more expensive marginal barrels."