OPEC’s crude oil production fell by another 246,000 bpd in July compared to June, as Saudi Arabia deepened its cuts, as U.S. sanctions further trimmed output in Iran and Venezuela, and as an outage restricted production in Libya.
According to secondary sources in OPEC’s closely watched Monthly Oil Market Report published on Friday, total OPEC crude oil production averaged 29.61 million bpd in July, down by nearly 250,000 bpd from June, and driven by lower output in Saudi Arabia, Iran, Libya, Venezuela, and Nigeria. Iraq and Algeria recorded the largest production increases, OPEC’s secondary sources estimates showed.
The July crude production of the cartel members is a multi-year low, and close to the 29.42 million bpd production estimate in the monthly Reuters survey, which noted that OPEC’s production was at an eight-year low last month.
Saudi Arabia, keen to restrain oil price slides amid a markedly bearish market sentiment, deepened its already deep cuts, slashing another 134,000 bpd to have its July production average 9.698 million bpd, OPEC’s report showed. The Saudis have vowed to keep production well below 10 million bpd—although their quota is 10.3 million bpd—and exports at below 7 million bpd, aiming to tighten the market as demand growth weakens with gloomy macroeconomic prospects.
Iran and Venezuela, both under U.S. sanctions, also saw their production down. Iranian production declined by 47,000 bpd from June to 2.213 million bpd in July, and Venezuela’s output dropped by 32,000 bpd to 742,000 bpd. Related: OPEC Needs Another 1 Million Bpd Cut To Boost Oil Prices
Crude oil production in Libya, one of the wildest cards in OPEC in terms of production consistency amid security concerns, fell by 42,000 bpd to 1.078 million bpd last month, after its largest oil field experienced two outages in two weeks. In the last week of July, Libya’s production dropped to a five-month low below 1 million bpd, after a fresh outage at the Sharara oil field.
Even with OPEC’s falling oil production, the cartel sees demand for OPEC crude next year even lower than the July production—at 29.4 million bpd, or 1.3 million bpd lower than the 2018 level.
Commenting on the oil market and macroeconomic developments, OPEC said in its report:
“While the outlook for market fundamentals seems somewhat bearish for the rest of the year, given softening economic growth, ongoing global trade issues and slowing oil demand growth, it remains critical to closely monitor the supply/demand balance and assist market stability in the months ahead.”
By Tsvetana Paraskova for Oilprice.com
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The reason is that the current glut in the global oil market is being augmented by the trade war which is creating uncertainty in the global economy and also depressing global oil demand and, therefore, prices.
As long as the trade war continues, the glut will continue to rise. Therefore, adding more cuts will be dealing with the symptoms rather than the cause of the problem. They will hardly make a dent on the glut until the US and China reach a settlement. This doesn’t seem close.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London