OPEC pumped its fewest barrels in more than five years in July, aided by a huge production decline in its largest producer, Saudi Arabia, along with falls in Iran, Nigeria, Libya and Venezuela.
The producer bloc saw output slide to 29.88 million barrels per day last month, a fall of 210,000 bbl/d from June, despite output gains by six of its members, an S&P Global Platts survey of industry officials, analysts and shipping data found.
Compliance with production quotas rebounded in July, mainly because Saudi Arabia pumped way below its quota, making up for undercompliance by Iraq, the second-largest oil producer in OPEC, and Nigeria.
The conformity rate for the 11 members covered by quotas rose to 117% in July, up from June's 105%.
However, OPEC's efforts to rebalance the market are moving sluggishly on tepid demand growth amid concerns of a weakening global economy.
Crude oil prices have fallen by more than 5% since early July when OPEC and its 10 non-OPEC allies, led by Russia, extended their 1.2 million-bbl/d production cut agreement through March 2020.
This comes even as OPEC's production has fallen by a whopping 2.55 million bbl/d since December 2018, when it agreed to implement the second round of its production cut deal.
Saudi summer slump
Saudi Arabia saw its production fall by 150,000 bbl/d to 9.70 million bbl/d as exports to almost all of its key customers dropped, along with a reduction of the kingdom's refinery runs.
This is the lowest the kingdom has produced for the month of July in almost a decade. Traditionally, production tends to increase in summer due to a rise in direct crude burn amid soaring temperatures.
Saudi oil minister Khalid al-Falih continued to assure the market that the kingdom will keep its production and exports below 10 million bbl/d and 7 million bbl/d, respectively, in August.
Iran's production dropped further as its exports have nosedived in the past year, thwarted by stringent U.S. sanctions.
The sanctions-hit country saw its output fall by 50,000 bbl/d to 2.30 million bbl/d in July, its lowest level since September 1988. Iran has now resorted to filling a growing flotilla of tankers with its crude and condensate as floating storage.
Production in countries that are exempt from the output cuts also fell, pushing OPEC production to its lowest since April 2014, when it pumped 29.72 million bbl/d.
Venezuela's crude output fell by 30,000 bbl/d to 730,000 bbl/d as production in the Orinoco belt was affected by problems with the country's electric power grid. The Latin American oil producer remains afflicted by blackouts, leaving the entire country, including oil installations, without power.
Production levels have stabilized between 720,000 bbl/d and 760,000 bbl/d in the past few months. Venezuela has, however, seen its output halve over the past year, with its spiraling economic crisis exacerbated by U.S. sanctions that began in January. In May, it produced 720,000 bbl/d, its lowest since a nationwide strike debilitated its oil industry in January 2003.
Nigeria remained the biggest outlier in terms of compliance, coming in 240,000 bbl/d over its quota at 1.93 million bbl/d in July. But the West African state did manage to cut its output by 40,000 bbl/d in July, paring the 110,000 bbl/d increase from May to June.
Libya produced 1.05 million bbl/d in July, a fall of 40,000 bbl/d from the previous month. The country's largest field, Sharara, was closed briefly mid-month due to a valve closure. Sharara was again shut in July 30 for similar reasons, showing how much at risk Libyan oil production is amid a deteriorating security environment as the country remains embroiled in a protracted civil war.
The overall production drop was offset by small gains in Angola, Ecuador, Algeria, Equatorial Guinea, Iraq and the United Arab Emirates.
Iraq increased its noncompliance over the month, with a 10,000-bbl/d production gain to 4.78 million bbl/d, leaving it 270,000 bbl/d over the target.
The rise was due to higher crude exports from its southern terminals, though these were slightly offset by a fall in loadings from the semi-autonomous Kurdistan region. But production has fallen since May, when it pumped a record high of 4.82 million bbl/d.
Eklavya Gupte and Jack Jordan are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.