The largest decline in “OPEC” production since 2020, with Saudi Arabia increasing cuts

OPEC crude oil production fell by the most in 3 years after Saudi Arabia cut its production further to support global markets.

Production of the Organization of the Petroleum Exporting Countries averaged 27.79 million barrels per day last month, according to a Bloomberg survey, down by 900,000 barrels per day, the largest drop since the organization and its allies cut supplies during the height of the Covid-19 pandemic in 2020.

Riyadh has committed to most of its additional 1 million barrels per day (bpd) of additional cuts it pledged in an effort to shore up prices in the face of weak economic data in China and recession fears in the United States. Oil prices rose with the lack of global supplies to reach their highest levels in 3 months, exceeding $ 85 a barrel on the London Stock Exchange recently.

Reduction extension

Oil traders expect Saudi Arabia to announce the extension of the cuts until September in the coming days, which increases the indications of a lack of supply in the market. While consuming countries worry that OPEC policy risks exacerbating inflation, it appears that the group's core members need higher oil prices to cover government spending.

According to a Bloomberg survey, Saudi Arabia pumped an average of 9.15 million barrels per day in July. Nigeria's supplies also fell by 130,000 barrels per day to 1.26 million per day, as a leak at the Forcados plant thwarted plans for the country to increase production.

Libya also suffered a setback, as production decreased by 50,000 barrels per day, to 1.1 million barrels per day, following the outbreak of a protest that briefly disrupted the Sharara oil field. Saudi Arabia's efforts to prop up the market got - belatedly - some help from Russia, a member of the OPEC+ alliance.

Russia exports

For months, Moscow broke its pledges to curtail supplies, as it focused on maximizing revenues to fund its war against Ukraine. But tanker tracking data reveals that they have cut back on exports for now. Export shipments reached their lowest level in 7 months, recording just under 3 million barrels per day.

The day after tomorrow, Friday, the Kingdom of Saudi Arabia and Russia will chair an online review session dealing with market conditions by the main countries in the OPEC + alliance. Representatives of the 23-country OPEC+ alliance are scheduled to meet in full in late November.

The Bloomberg survey is based on ship-tracking data, information from officials, and estimates from consulting firms including Kpler Ltd, Rapidan Energy Group and Rystad Energy.