OPEC’s crude oil output remained consistent for the third consecutive month, while some key members continued to produce above their agreed quotas.
June Production Overview
In June, OPEC’s average production was 26.98 million barrels per day (MMbpd), which is a decrease of 80,000 barrels per day (bpd) compared to the previous month, as per a Bloomberg survey. The decline was mainly driven by small reductions in Iraq and Nigeria.
The survey highlighted that Iraq and the United Arab Emirates have not yet fully implemented the cutbacks agreed upon with other leading members at the beginning of the year. Additionally, Iraq has not fulfilled additional compensation cuts promised to offset previous overproduction.
Impact of Production Cuts
The production cuts by OPEC and its partners, led by Saudi Arabia, have somewhat succeeded in balancing global markets against new supplies from the U.S. and other American regions. Brent crude futures are trading near $87 a barrel, close to a two-month high.
This recovery, though challenging for consumers still facing inflation, is expected to boost revenue for OPEC+ members who depend heavily on petroleum sales to fund government expenditures.
However, this may still fall short of needs: Saudi Arabia requires prices near $100 a barrel to support an ambitious economic reform agenda, according to the International Monetary Fund.
Struggles with Implementation
To raise crude prices, the alliance might need to fully adhere to its pledged reductions, but improving compliance has proven difficult.
In June, Iraq cut its output by 30,000 bpd to 4.25 MMbpd. A reduction in exports brought the country closer to its assigned limit, but Iraq still exceeds its quota by about 250,000 bpd, not including the lack of extra “compensation cuts.” Iraq has long struggled with OPEC+ limits as it aims to rebuild its economy after years of conflict.
Saudi Arabia’s Position
Saudi Arabia’s production stayed relatively steady at 8.99 MMbpd, according to the survey. The country significantly reduced exports by 9% to 5.61 MMbpd, as domestic fuel consumption for power generation and air conditioning typically increases during this time of year.
Last month, the OPEC+ coalition announced plans to gradually ease supply restrictions and increase production starting in the fourth quarter. However, when prices dropped immediately, ministers stressed that the increases are conditional and could be delayed.
Upcoming Review
The alliance will review its strategy at an online monitoring meeting with major members on August 1.