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Saudi Arabia has increased its oil production this month by 700,000 bpd to 10.70 million bpd, very close to its highest-ever production of 10.72 million bpd from November 2016, a Reuters survey showed on Friday in a clear sign that OPEC’s largest producer is making up for supply drops elsewhere within the cartel.
Saudi Arabia’s previous production record of 10.72 million bpd was set in November 2016, just before the original OPEC and allies’ deal to curb production entered into force in January 2017.
“The Saudi number for June will be very, very high,” an industry source tracking Saudi Arabia’s oil production told Reuters on Friday. “Surprisingly high.”
Although Saudi production typically rises in the summer due to higher domestic crude oil demand for power plants, OPEC’s leader has also been boosting exports this month, according to the Reuters survey. Saudi Arabia’s crude oil exports rose to around 8 million bpd in June, according to a Reuters industry source. This export volume compares to 7.3 million bpd for April, the latest month for which official figures are available.
For July, the Saudis plan to pump around 11 million bpd of crude oil, an industry source familiar with the Kingdom’s production plans told Reuters earlier this week.
Related: Oil Rallies Towards $80
While Saudi Arabia and Russia managed to get OPEC and allies to agree to a vague statement that they would ease compliance to 100 percent from record-breaking more-than-100-percent compliance, the archrivals within OPEC—Saudis and Iran—have been in dispute over the meaning of that statement. Saudi Arabia says that it implies an indirect reallocation of production quotas, while Iran has been insisting that the latest agreement doesn’t mandate any producer to pump above their quota.
Saudi Energy Minister Khalid al-Falih said on Saturday that “Some of the countries ... are not going to be able to produce, so the others will. And that implies there will be indirectly a reallocation.”
But Iran’s OPEC governor Hossein Kazempour Ardebili strongly disagrees and told Reuters that “In the last meeting of OPEC, our resolution does not allow any member to produce more than their quota, but to try to reach 100 percent compliance.”
“The State Department says it is short and Saudi Arabia says they will produce 11 million bpd in July. I regret to say they both are ridiculing our organization,” Kazempour told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.