Saudi Arabia has revealed that its crude oil production climbed to over 11 million barrels a day last month, exceeding the symbolic level for the first time in two years as the kingdom fulfilled a pledge to stabilize world markets.
The increase shown in the Organization of Petroleum Exporting Countries’s, OPEC, monthly report followed an agreement by the group to speed up the return of halted supplies amid exhortations from the US and other key consumers to tame soaring fuel costs.
It’s the highest monthly production level the kingdom has reported to OPEC since April 2020, when output topped 12 million barrels a day during a short-lived price war with fellow OPEC+ leader Russia. Saudi output has only rarely reached 11 million barrels in the country’s decades as an oil exporter.
The arrival of the extra barrels corresponded with a pull-back in crude prices, which have lost about 23 per cent in the past three months.
Brent crude futures topped $120 a barrel in early June amid fears of supply disruption following Russia’s invasion of Ukraine. They now trade near $95, tempering the wave of inflation that has hit the world economy.
The agreement by OPEC+ to accelerate the return of the last tranche of supplies shuttered during the 2020 pandemic followed months of diplomatic outreach by US envoys.
A landmark visit by President Joe Biden to Saudi Arabia in July failed to unlock a further production increase, but he has hailed the drop in gasoline prices since his trip.
Riyadh said it raised supplies by 236,000 barrels a day to 11.05 million a day in August, almost exactly hitting its target for the month, according to a monthly report from OPEC’s Vienna-based secretariat. Neighboring United Arab Emirates said it added 51,000 barrels a day, to 3.18 million a day.
The supply boost appears to be over for now, as the kingdom and its allies tighten output again in response to a darkening economic backdrop. Last week the 23-nation OPEC+ alliance announced a symbolic cutback of 100,000 barrels a day in order to address the “higher volatility and increased uncertainties” in the oil market.
Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview the group would continue to be “attentive, preemptive and proactive.”
OPEC reiterated his view in its monthly report, saying that oil futures aren’t faithfully reflecting the realities of supply and demand, distorting the ability of companies to hedge. “The market is in a state of schizophrenia, and this is creating a type of yo-yo market and sending erroneous signals,” it said.
The coalition will hold its next monthly gathering on October 5.
In addition to the direct submissions of output data from its members, OPEC’s report also includes production estimates compiled from a number of external sources such as consultants and news outlets.
This average which OPEC uses to gauge compliance with its targets — assessed the kingdom’s output slightly lower, at 10.9 million barrels a day.
OPEC largely kept its forecasts for global supply and demand this year and next unchanged from last month’s report. It projects “robust” demand growth of 3.1 million barrels a day this year and 2.7 million a day in 2023.
The outlook could be bolstered by fiscal support measures in Europe and China, or a resolution to the conflict in Ukraine, it said.