OPEC produced more oil in August than it did in July as the cartel continued to relax its production cuts, a Reuters survey has revealed, with recovering demand also stimulating more production.
The August increase amounted to 950,000 bpd, the survey said, to a total of 24.27 million bpd. This appears to be despite Iraq’s pledge to cut an additional 400,000 bpd from its output in August to compensate for its undercompliance with the OEPC+ cuts. Nigeria had also pledged to effect additional production cuts to compensate for its overproduction since May.
When OPEC+ extended the record production cuts of 9.7 million bpd by one month through the end of July, the coalition agreed that all countries in the pact should comply 100 percent with their quotas, and those who have not, should be compensating for lack of compliance by overachieving in the cuts in July, August, and September.
Beginning in August, OPEC+ has reduced the cuts to 7.7 million bpd, of which OPEC’s 13 members need to cut a combined 4.868 million bpd, excluding Iraq’s and Nigeria’s compensatory cuts.
Demand for oil may be improving and thus helping the cartel stick to its quotas, but even OPEC is not particularly optimistic for oil demand this year. In its latest Monthly Oil Market Report the group said it expected oil demand loss this year to hit 9.1 million bpd, a 100,000-bpd upward revision on its July forecast. OPEC also estimated that the global economy could shrink by as much as 4 percent this year, a revision from 3.7 percent estimated in July.
Since June, when OPEC’s production hit the lowest since 1991, according to data surveyed by Reuters, output has rebounded by 2 million bpd, including 1 million bpd of production cuts that Saudi Arabia had implemented voluntarily to hasten the oil price rebound by tightening supply. In August, the Kingdom, which is OPEC’s largest producer by far, pumped 9 million bpd, up by 600,000 bpd from July.
By Irina Slav for Oilprice.com
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Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London