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Lower OPEC production due to Saudi cuts

OPEC oil production is declining due to drastic cuts by Saudi Arabia to support prices, while global demand is expected to increase in 2023 and 2024.

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In July, oil production by OPEC members fell by 836,000 barrels per day. Saudi Arabia has implemented cuts to stabilize prices, according to OPEC’s monthly report.

Drop in OPEC oil production, led by Saudi Arabia in July

In July, oil production by the 13-member Opec, which counts Saudi Arabia as a heavyweight, “fell by 836,000 barrels month-on-month to an average of 27.31 million barrels per day”, Opec said in its monthly report, citing indirect sources.

This drop was mainly due to Saudi Arabia, whose production fell by an estimated 968,000 barrels a day in July, a massive decline that was only slightly offset by production increases in countries such as Angola and Iraq.

Joint Opep+ initiatives: Massive production cuts to stabilize world prices

Nine members of the OPEC+ alliance (comprising 13 member countries and 9 allied states), including Riyadh and Moscow, began voluntary production cuts in May, totaling 1.6 million barrels/day (mb/d). This initiative is designed to keep prices high. Riyadh opted for a further production cut of one million barrels/day in July, extended twice until September. Moscow has pledged to reduce its exports by 500,000 barrels/day in August, then by 300,000 barrels/day in September.

Expected growth in global oil demand: OPEC’s outlook for 2023 and beyond

For 2023, OPEC is maintaining its forecast for global demand growth at 102 mb/d, with an increase of 2.4 million barrels per day compared to 2022. This assessment is based on OPEC’s monthly revisions. In Q3, global oil demand should reach 101.96 mb/day, and 103.21 mb/d in Q4.

“A persistent increase in demand for fuel for transport and industry, supported by a recovery in activity in China and other non-OECD regions, should boost demand in 2023,” Opep estimates in its report.

For 2024, the organization also predicts that “solid global economic growth, accompanied by continued improvement in China, should boost oil consumption”.

OPEC forecasts an increase in demand of 2.2 mb/d, which would bring world demand for black gold to an average of 104.3 mb/d.

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