Saudi oil output hit 10.70 million barrels per day (b/d) in June to compensate for falling Venezuelan and Libyan production due to instability in the two OPEC countries.
Saudi oil output increase has angered Iran, surprised some other OPEC members
A survey by Reuters shows that OPEC crude production rose in June, and Saudi oil output hit near-record highs as the cartel kingpin appears to be heeding calls from major crude consuming countries to increase oil supplies.
Last month, OPEC increased its production to 32.32 million barrels per day (b/d), up by 320,000 b/d in May. According to the survey, the June total is the highest since January 2018.
Saudi Arabia increased its production to 10.70 million b/d in June, close to its record high of 10.72 million b/d. The kingdom boosted its output to make up for plummeting production in Venezuela and other cartel countries.
Recently, US President Donald Trump urged the Saudis and OPEC to increase their crude production to compensate for crude supply shortfalls resulting from impending US sanctions on Iran.
Trump is concerned about rising oil prices, which hit over $80/barrel this year for the first time since 2014.
After months of posting output at levels well below their pledges agreed to in the OPEC supply cut agreement, last month, pact participants agreed to increase their production to 100 per cent compliance with the deal.
According to Saudi Arabia, the OPEC decision could mean an increase in production of about 1 million b/d, however, the cartel’s statement following its meeting in Vienna last month, offered no clear volume amount.
“We are entering the second half of the year with a huge amount of uncertainty surrounding the supply side of the equation,” Tamas Varga of oil broker PVM told Reuters.
“Depending on your belief you could just as easily bet on $100 as $60 by the end of the year.”
The June increases in Saudi oil output have lowered OPEC’s collective adherence to its supply agreement from 167 per cent in May to 110 per cent in June.
While the production increases fall in line with Trump’s call for higher output, Iran is reported to be infuriated with Saudi Arabia’s output increases. Some other OPEC members were also surprised by the volume of the increase in the kingdom’s crude output.
Reuters reports Saudi’s Gulf allies, including Kuwait and the United Arab Emirates have not followed Saudi Arabia’s lead and have kept their output levels steady in June.
Algeria has increased its supply thanks to diminishing impact due to maintenance work and Iraq also pumped more crude.
However, Libya’s production dropped due to civil war in the African nation. After attacks in mid-June shut down the Libyan ports of Ras Lanuf and Es Sider, output fell from nearly 1 million b/d.
After pumping more in May and April, Iranian crude production dropped in June alongside oil exports as the expected re-imposition of US sanctions against Tehran discourage customers from buying the country’s crude.
Venezuelan output also fell again in June as the crippling recession continued to hamper the country’s oil industry.
In 2018, OPEC has an implied production target of 32.78 million b/d. In June, the cartel pumped about 460,000 b/d below that target, mostly due to shortfalls in supply from Venezuela and Angola.