OPEC’s oil production ticked higher in July, but cuts by top exporter Saudi Arabia weighed on the 15-member group’s output just one month after it agreed to start pumping more crude, CNBC informed.
The Saudis throttled back drilling last month after agreeing with OPEC, Russia and several other producers to put more barrels on the market in June. The kingdom is facing pressure from big oil consuming nations like China and India, as well as the Trump administration, to tamp down fuel costs ahead of the renewal of U.S. sanctions on Iran, OPEC’s third biggest producer.
President Donald Trump is aiming to cut Iran’s oil exports to zero by November, a policy that threatens to leave the world short of oil and boost prices at the pump if OPEC and Russia cannot fill the gap. A group of two dozen oil-producing nations has been limiting its production since January 2017 in order to drain oversupply, but has scaled back that policy in light of the Iranian sanctions and output declines in places like Venezuela and Angola.
“Compared to a year earlier, there has been an overall improvement in crude oil prices in 2018,” OPEC said in its monthly report. “At the same time, product prices have generally followed the upward trajectory of crude oil prices.”
In another twist for the market, OPEC’s latest report shows a significant discrepancy between July production figures provided by Saudi Arabia and data compiled by independent sources. While the kingdom says it cut output by about 200,000 barrels per day, an average of estimates from several outside sources puts the drop at nearly 53,000 bpd.
Saudi Arabia had telegraphed the drop prior to the release of the report. However, S&P Global Platts and the U.S. Energy Information Administration estimated the Saudis actually hiked output to 10.6 million bpd in July, The Wall Street Journal reported last week. According to the Journal, the Saudis asked several sources whose estimates underpin the independent figure to make an adjustment for July, but Platts stuck by its analysis.
The Saudis face the challenge of managing the oil market so that prices do not rise high enough to hurt demand or upset allies like Trump, but do not fall so low that they put stress on the kingdom’s finances.
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