Saudi Arabia hiked its oil output in June to the highest level since the end of 2016, as it aims to cool the market after crude prices recently rose to 3½-year highs.
The jump in Saudi supplies shows the world’s top crude exporter is making good on its recent vows to tame oil prices. The kingdom has faced pressure from big crude importers like China and India, as well as President Donald Trump, who worry about negative economic impacts from rising fuel costs.
The increase also comes as OPEC forecast global oil demand will surpass 100 million barrels per day (bpd) next year.
Saudi Arabia reported that it pumped nearly 10.5 million bpd last month, up from just more than 10 million bpd in May. Data from independent sources cited in OPEC’s monthly report showed a slightly smaller build to just more than 10.4 million bpd.
That pushed production from OPEC to more than 32.3 million bpd in June, up 173,000 bpd from the previous month, according to the independent figures. The cartel’s total production got a boost of 331,000 bpd from the Republic of Congo, which began reporting as OPEC’s 15th member this month.
OPEC, along with Russia and several other producer nations, has been limiting output since January 2017 in order to drain a crude glut that sent oil prices to 12-year lows in 2016. However, output from the participating nations has fallen much more than expected, largely due to production problems in several of the countries.
At a contentious meeting last month, the cartel agreed to increase output in light of falling production in Venezuela and looming U.S. sanctions on Iran, the world’s fifth-biggest oil producer. The producers agreed to start raising output beginning in July, but OPEC’s latest monthly report shows several began pumping more last month.
Iraq chipped in the second-biggest increase in June, upping its output by 71,500 bpd to about 4.5 million bpd. Baghdad was one of several countries that initially expressed skepticism about lifting OPEC’s production caps.
The United Arab Emirates and Kuwait raised output by 35,100 bpd and 27,300 bpd, respectively. The Arab nations are seen as two of only a handful of OPEC members with spare capacity.
The gains were offset by a 254,000-bpd plunge in production from Libya, where an ongoing political rift shut several of the country’s oil ports. Output also continued to decline in Angola and Venezuela, dropping by 88,300 bpd and 47,500 bpd, respectively.
Iran also posted a small drop, bringing its output to about 3.8 million bpd. U.S. demands for oil buyers to cut Iranian imports to zero by November have roiled the market in the last two weeks. However, crude prices eased Tuesday after Secretary of State Mike Pompeo signaled some countries could get waivers.
2019 supply and demand forecast
OPEC also released its initial forecast for oil supply and demand in 2019 on Wednesday.
The group sees demand growth moderating, but still increasing by 1.45 million bpd next year. That would push the world’s appetite for oil beyond the 100 million bpd threshold for the first time.
However, OPEC made clear that its view of the global economy assumes there is no significant increase in trade tariffs and that current disputes will soon be resolved. The cartel appeared to be referencing the growing number of trade battles the United States has pursued against China, Europe, Canada and other countries.
“Hence, if trade tensions rise further, and given other uncertainties, it could weigh on business and consumer sentiment,” OPEC said. “This may then start to negatively impact investment, capital flows and consumer spending, with a subsequent negative effect on the global oil market.
OPEC expects production from countries outside the group to jump by 2.1 million bpd in 2019, led by surging U.S. output. That means the world will need about 32.2 million bpd from OPEC, or roughly 800,000 fewer bpd than during 2018, the group estimates.
“Therefore, if the world economy performs better than expected, leading to higher growth in crude oil demand, OPEC will continue to have sufficient supply to support oil market stability,” the group said.
