Saudi Arabia lowered its oil production in July even as the kingdom has pledged to raise output significantly to make up for an expected drop in Iranian exports. Opec’s largest producer pumped just under 10.4m barrels a day last month, according to numbers submitted by analysts and consultants to Opec’s research arm. This is a fall of more than 52,000 b/d from the prior month. Saudi’s own numbers showed an even lower number, below 10.3m b/d. The figures, published in Opec’s monthly oil market report, are being watched closely after Saudi Arabia and partners including Russia committed to a more than 1m b/d increase following a meeting of energy ministers in June.
US president Donald Trump had asked global producers to pump more oil after his administration launched new sanctions on Iran’s oil sector. He seeks to keep crude prices in check ahead of the country’s midterm elections in November. The kingdom had output of closer to 10m b/d in May as Saudi Arabia and other countries enacted steep production cuts as part of a global output deal. The Saudi numbers for July, however, have come under scrutiny with some energy analysts and price reporting agencies claiming they are much higher – above 10.6m b/d. The kingdom says it has lowered production because it has not seen sufficient demand for its crude, as rival Iran offers heavy discounts for its crude ahead of the new US restrictions that take effect later this year.
Those that dispute this account say that Saudi seeks higher output to placate the US but also wants to prevent prices from slipping too much, making way for mixed messages. Brent crude prices, which rose above $80 a barrel in May, has since slipped to below $73 a barrel. It also has to maintain relations with Opec rival Iran. Opec crude production totaled 32.3m b/d, up 41,000 b/d from the prior report, despite the Saudi slip. The UAE, Kuwait, Angola, Algeria and Iraq were among countries that pumped at higher levels. Opec expects production from outside the cartel to reach 59.6m b/d in 2018 and 61.8m b/d in 2019.
Both numbers were revised higher from last month’s report due to new assumptions about Chinese supply. The cartel’s research arm lowered its demand growth expectations for 2018 to just over 1.6m b/d with total consumption forecast at 98.8m b/d. It also downgraded its 2019 growth forecast slightly to 1.4m b/d, with total demand at 100.3m b/d. In turn, Opec expects demand for its crude to stand at around 32.9m b/s in 2018 and 32m b/d next year. Both were revised slightly lower from last month’s report.