OPEC production plunges to three-year low as Saudi Arabia implements deeper cuts

(Bloomberg) – OPEC’s crude production tumbled by the most in three years as Saudi Arabia implemented a deeper cutback in a bid to shore up global markets.

Output from the Organization of Petroleum Exporting Countries plunged by 900,000 bpd last month to an average of 27.79 MMbpd, according to a Bloomberg survey. It’s the biggest reduction since the group and its allies slashed supplies during the depths of the Covid pandemic in 2020.

Riyadh delivered on the vast majority of the extra 1 MMbpd cut it promised, in a bid to buoy prices against lackluster economic data in China and concerns about recession in the U.S. Oil prices have recovered as world supplies tighten, reaching a three-month high above $85 a barrel in London recently.

Traders expect the kingdom will announce an extension of the measure into September in the coming days, deepening signs of a supply shortfall in the market. While consuming nations fret that OPEC policy risks reviving inflation, key group members appear to need higher oil prices to cover government spending.

Saudi Arabia pumped an average of 9.15 MMbpd in July, according to the survey. Supplies also fell in Nigeria, by 130,000 bpd to 1.26 MMbbl daily, as a leak at the Forcados terminal thwarted the country’s plans to bolster production.

Libya suffered a setback, with production slipping by 50,000 bpd to 1.1 million a day, following a protest that briefly halted its Sharara oil field. 

The Saudis are also — belatedly — receiving some help in their effort to support the market from Russia, a member of a wider alliance known as OPEC.

Moscow had for many months flouted pledges to reduce supplies as it focused on maximizing revenues to fund its war against Ukraine, but tanker-tracking data shows it’s now paring exports. Shipments have slumped to a seven-month low at just under 3 MMbpd. 

Saudi Arabia and Russia will chair an online review of market conditions by key OPEC nations on Aug. 4. The full 23-nation OPEC+ alliance is due to meet in late November.

Bloomberg’s survey is based on ship-tracking data, information from officials and estimates from consultants including Kpler Ltd., Rapidan Energy Group and Rystad Energy.