Saudi Arabia pumped over 100,000 bpd of crude oil more in May, with daily production reaching 10 million bpd, officials from the country’s oil industry said, as quoted by the Oil and Gas Journal, adding that plans are to add a further 100,000 bpd this month.
The news comes on the heels of Russian media reports that the country’s oil production recovered to 11.1 million barrels. This is 143,000 bpd above the country’s quota under the OPEC+ production cut deal, and only about 100,000 bpd below the record-breaking production rate in November 2016, which Russia took as basis for its cuts.
In other words, while some analysts still wonder if the reports about Russia and Saudi Arabia discussing a production increase of 1 million bpd are just speculation or an action plan, the increase is already happening and it is making at least one other OPEC member unhappy.
Yesterday, Iraq’s Oil Minister Jabbar al-Luiebi said Baghdad “rejects unilateral decisions by some oil producers without consulting the rest of the members” of OPEC, clearly signaling that Saudi Arabia, leader of the OPEC pack as it may be, is not free to raise production without telling anyone about it. Related: Can Saudi Arabia Prevent The Next Oil Shock?
There are already a lot of signs pointing towards a tough June 22 OPEC+ meeting, with Russia and Saudi Arabia clearly in favor of higher production and Iraq and Iran clearly opposed to it. Iraq is not really in a good position to oppose the raise, however. OPEC’s number-two never complied with its cut quota of 210,000 bpd. In fact, estimates by Platts show Iraq has exceeded its ceiling by the most within OPEC—by some 78,000 bpd since the start of the deal, with compliance at just 63 percent.
The upcoming OPEC+ meeting is shaping up as a tough one as some analysts have already warned. When OPEC agreed to cuts, some members, notably Iraq, took quite a lot of convincing that it was necessary to start cutting, and it looks like now they will need equally intensive convincing that it’s time to stop cutting.
By Irina Slav for Oilprice.com
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Still we need to look at average Saudi oil production over a period of at least six months before suggesting that Saudi Arabia is going beyond its production quota under the OPEC/non-OPEC production cut agreement. Production levels by most OPEC members vary from one month to the other.
On the other hand, the Saudi action could be a response to news that Russia raised oil production in early June by 143,000 barrels a day (b/d) above its production quota under the OPEC deal. It may also mean that Saudi Arabia is paving the way for acceding to President Trump’s request to it to increase its oil production to replace any shortfall in Iran’s oil exports as a result of the forthcoming US sanctions.
One thing, however, is certain. The next OPEC meeting on the 22nd of June will have great impact on future oil prices and the rapprochement between Saudi Arabia and Russia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
July 2017 Saudi Arabia oil burn hit 1.39mn b/d. Fuel burn was a record 733,000 b/d. This put SA on to burn a record 1.02mn b/d for the year as a whole.
Increased oil burn impacts crude available for export. Crude exports will drop due to summer high consumption, and its surprising that the media does not explain the difference between production and exports. Domestic consumption is 10 percent of the total production. Refining consumption is another large subtraction that is not discussed that will further reduce their crude exports.