Oil Under Pressure As Saudis Break Key Promise

Saudi Arabia has told OPEC that it had pumped 10.07 million barrels per day in June, up by 190,000 bpd from May, and exceeding its 10.058-million-bpd production level quota under the output cut deal, Bloomberg reported on Tuesday, citing a person with knowledge of the data.

OPEC's Monthly Oil Market Report with data for June is expected to be released on Wednesday, July 12. According to the latest currently available OPEC report with data for May, Saudi Arabia directly communicated to OPEC that its crude oil output in May was 9.880 million bpd. According to secondary sources, which the market is looking at, Saudi Arabia's oil production in May was 9.940 million bpd.

Under the OPEC/non-OPEC deal to cut production, Saudi Arabia pledged to take 486,000 bpd off its October 2016 level output and keep production at 10.058 million bpd.

The market will be watching closely OPEC's data on Wednesday, but it typically gives production numbers, not exports. According to ClipperData, OPEC's exports-including those of Saudi Arabia-jumped in June, and the cartel exported more crude in June than it did in October, while total global crude exports are over 10 percent higher than year-ago levels. Related: Will Oil Inventories Continue To Fall Over The Summer?

Talk of Saudi Arabia telling OPEC that it had exceeded the output limit comes at a time when oil market sentiment is gloomy and bearish amid concerns over rising supply from the U.S.-and from OPEC's Libya and Nigeria, which are exempt from the cuts. In addition, market patience is wearing thin, with global inventories still higher than the five-year average, pointing to the fact that OPEC cuts have not effectively erased the glut as the cartel had expected.

At 11:09am EDT on Tuesday, WTI Crude was trading up 1.06 percent at US$44.87, while Brent Crude was trading up 1.07% percent at US$47.38.

By Tsvetana Paraskova for Oilprice.com

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