Output from the Organization of Petroleum Exporting Countries (OPEC) experienced a sharp decline of 900,000 barrels per day (bpd) last month, reaching an average of 27.79 million bpd, according to a recent Bloomberg survey. This significant reduction marks the most substantial cut in three years, reminiscent of the measures taken by the group and its allies during the depths of the Covid pandemic in 2020.
The notable drop in production comes on the heels of Saudi Arabia’s decision to implement even deeper cutbacks in a bid to stabilize global markets. Riyadh has been proactive in fulfilling the majority of the extra 1 million bpd reduction it had pledged, aiming to buoy oil prices amidst lackluster economic data in China and concerns about a potential recession in the U.S. As a result, oil prices have seen a resurgence, recently soaring to a three-month high of over $85 a barrel in London.
Industry experts anticipate that the Kingdom of Saudi Arabia will extend these measures into September in the coming days, signaling a potential supply shortfall in the global market. In July, the Kingdom maintained an average production level of 9.15 million bpd.
The Bloomberg survey also revealed that Nigeria experienced a reduction in supplies by 130,000 bpd, amounting to a daily production rate of 1.26 million barrels, due to a leak at the Forcados terminal, hindering the country’s efforts to bolster production.
Similarly, Libya faced setbacks as its production slipped by 50,000 bpd to 1.1 million barrels per day following a protest that briefly halted operations at its Sharara oil field.
To further stabilize the market, Saudi Arabia has sought assistance from Russia, a member of the wider OPEC alliance. Moscow, which had previously been reluctant to reduce supplies, has now taken steps to pare down exports, evident in the recent slump to a seven-month low of just under 3 million bpd in shipments.
On August 4, Saudi Arabia and Russia will jointly chair an online review of market conditions involving key OPEC nations. Additionally, the full 23-nation OPEC+ alliance is scheduled to meet in late November to discuss further strategies for the energy market.
With these developments, it is evident that OPEC’s actions, led by Saudi Arabia and supported by Russia, are playing a crucial role in addressing the current challenges in the global energy landscape. As the world witnesses the impact of these supply adjustments, market players and policymakers alike are closely monitoring the evolving dynamics to ensure stability and sustainability in the oil market.