A sharp output reduction by the swing producer of the OPEC group, Saudi Arabia, drove the plunge in global oil production by 910,000 barrels per day (bpd) to 100.9 million bpd in July, according to a recent report by the International Energy Agency (IEA) on Friday.
Earlier this month, Saudi Arabia stated that it would extend its existing 1 million bpd output cutbacks through September. The country originally reduced output in July and extended it through August.
Likewise, Russia announced it would continue to voluntarily reduce oil exports. It said it would reduce exports by 500,000 bpd in August and cut 300,000 bpd in September.
The agency said Saudi Arabia reduced output by 920,000 bpd in July to 9.06 million bpd. Except for the 2020–2021 COVID-19 period, Saudi crude supply has not been as low since 2011.
The Saudi-Russian revisions are in addition to 3.7 million bpd of OPEC+ limitations, which include a 2 million bpd drop in its output ceiling in November 2022 and 1.7 million bpd of extra cuts from some members beginning in May.
According to the report, output from the OPEC+ bloc, which also includes Russia, fell by 1.2 million bpd in July to 50.7 million bpd, the lowest since October 2021, while non-OPEC+ volumes rose by 310,000 bpd to an unprecedented 50.2 million bpd.
Riyadh will bear the brunt of the cuts, which will reduce OPEC+ alliance flows to two-year lows of 50.6 million bpd in the third quarter, while record non-OPEC+ supply will temper the overall decrease.
According to the IEA, global oil output is projected to expand by 1.5 million bpd to a record 101.5 million bpd this year.
Non-OPEC+ countries such as the US, Brazil, China, and Guyana are expected to drive gains of 1.9 million bpd, accounting for 49% of global supply this year.
In 2024, global oil consumption gains are forecast to slow to 1 million bpd, with overall demand reaching 103 million bpd.
Non-OPEC+ is set to dominate world supply growth next year, adding 1.3 million bpd, raising its share of total oil output to 49.6%. OPEC+ production, however, will record a limited increase of 160,000 bpd.
The agency projected that global oil demand will expand by 2.2 million bpd to 102.2 million bpd in 2023, with China accounting for more than 70% of this growth. Summer air travel, increasing oil use for electricity generation, and surging Chinese petrochemical activity all contribute to the increase in global oil demand.
The IEA revised down its global demand growth forecast for 2024 by 150,000 bpd. Global oil demand is now forecast to increase by 1 million bpd in 2024 to 103.2 million bpd.
