OPEC oil supply falls by 3 % due to Saudi oil cut

Crude oil production by the Organisation of Petroleum Exporting Countries (OPEC) fell by 3 percent in July to 27.310 million barrels per day (mbd), 836,000 bd less than in June, according to estimates released Thursday by the Vienna-based oil organisation.

The figures in OPEC's monthly report reveal that the sharp drop was due to Saudi Arabia's sharp cut in its pumping, which is one of the main factors driving the price of "black gold" up in July and continues to do so this month.

In its monthly average, the price of a barrel of Brent, the benchmark for Europe, was 80.16 dollars in July, an increase of more than 5 dollars or almost 7 % over the average for the previous month, the document indicates.

Even higher, by 7.8 % (5.87 dollars) and 8.2 % (5.76 dollars), were the increases in the OPEC benchmark barrel and Texas Intermediate Oil (WTI, the US benchmark), which were sold at 81.06 and 76.03 dollars on average, respectively.

The sustained upward trend has continued in recent weeks, with WTI today trading above $83, while Brent is above $87 and OPEC crude oil is close to $90.

According to the report's data based on "secondary sources", i.e. estimates by independent institutes, Saudi Arabia pumped 9.02 mbd in July, 968,000 bd or almost 10% less than in June, figures that differ very little from the official ones transmitted by the Wahhabi kingdom.

With this, Riyadh has complied almost one hundred percent with its decision to apply an "additional and voluntary" cut of one million bd in July to shore up prices, a measure that has already been extended to August and September.

This large Saudi cut, together with the drop in Libyan extractions (-52,000 bd), more than offset increases in other partners, such as Iran (+68,000 bd), Angola (+56,000 bd) and Venezuela (+37,000 bd).

Apart from the extra Saudi cut and Russia's promise to also lower its exports between July and September, the OPEC+ alliance, formed by the thirteen OPEC partners and ten allied countries, maintains in force pumping reductions totalling 3.6 mbd, close to 3.6 % of world crude production.

They were adopted last October and April, but only began to have the desired effect of raising prices in the middle of the year.

Higher gasoline consumption due to increased mobility during the summer holidays in the northern hemisphere and fuel demand in the Middle East contributed to higher oil prices in July, according to OPEC experts.

In addition, stockpiles of oil products in consumer nations are low, which is another bullish factor.

"Despite the current high level of refinery operations, gasoline and middle distillate stocks remain well below the average level of the past five years in the US and Europe," they note.

"Looking ahead", OPEC considers that refinery maintenance "and possible production outages during the US hurricane season could constrain the Atlantic Basin market".

And it makes it clear that this outlook, coupled with the OPEC+ tap shutdown, will help to keep "oil prices" high, which despite their sharp rise are still below the level of a year ago, when they were above $100/barrel.

As for global demand for "black gold", the report puts it at an average of 102.01 mbd in 2023 and 104.25 mbd in 2024, unchanged from the forecasts made a month ago.