London — The pressure on Saudi Arabia to pump more crude has lessened over the past few weeks.
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The kingdom has boosted its production by almost 500,000 b/d from May levels and deemed that sufficient to meet the market's needs for now, as the global supply outlook has improved.
Libya's eastern ports are back in business after a blockade was lifted last week, allowing its crude production to ramp up by several hundred thousand barrels per day.
Russia has said its output has risen some 200,000 b/d this month, while Saudi Arabia's Gulf allies Kuwait and the UAE have announced significant planned increases under OPEC's deal with its allies to ease overcompliance with production cuts that had threatened to overtighten the market.
US shale production remains robust, with the US Energy Information Administration forecasting a record 7.47 million b/d to hit the market next month.
Meanwhile, China, the world's largest crude importer, saw its inflow fall to a six-month low in June as demand from independent refiners appeared to be moderating.
Those factors have contributed to the fall in oil prices of more than $5/b since US President Donald Trump tweeted at OPEC on July 4 to open the taps to cool the market. ICE Brent futures were trading at $73.07/b at 1352 GMT.
Possibly seeking to put a floor under prices, Saudi Arabia's OPEC Governor Adeeb al-Aama said Thursday the kingdom's crude exports in July would be about the same as June levels, while exports in August would drop by 100,000 b/d.
International oil markets were shaping up as "well-balanced in the third quarter," he said in a statement. Fears that Saudi Arabia would flood the market were "without basis," he said.
Aama's comments came after a marathon meeting Wednesday in Vienna of an OPEC/non-OPEC technical committee, which he chairs, to review market conditions and assess members' production outlooks.
It was the first such committee meeting since OPEC, Russia and other partners agreed June 23 on a 1 million b/d output increase without specifying how those barrels will be allocated.
Saudi Arabia, as OPEC's largest producer, was expected to provide the bulk of that increase and had signaled its intentions at the meeting to produce as much as 11 million b/d, compared to its May output of 10.03 million b/d and far in excess of its quota of 10.06 million b/d.
But Aama's statement may indicate that Iran, Saudi Arabia's primary OPEC antagonist and which had sent a delegation to the meeting, has been appeased for now that the kingdom was not planning to ramp up production further and key on Iran's market share.
Iran, along with Iraq and Venezuela, had opposed any plans by OPEC counterparts to produce above their individual quotas but is largely powerless to prevent such actions, aside from vocally protesting, as it has over the past few weeks.
Iranian officials have not responded to requests for comment.
To be sure, supply risks still remain.
Most notably, US sanctions on Iran snap back on November 4, with analysts expecting 1 million b/d or more of Iranian crude to be taken off the market, and Venezuela's economic crisis sees no end in sight, as its production continues to plummet.
Libya's security remains tenuous, with oil exports from its western Zawiya port now on force majeure after a recent kidnapping at the Sharara field.
The trade battle between the US and China also threatens to escalate, potentially dampening demand if the retaliatory tariffs damage their economies.
Canada's Suncor has said its 350,000 b/d Syncrude plant outage would last until September, instead of the earlier announced end-July, and North Sea production could yet be impacted by a series of worker strikes.
Expect more price volatility ahead, said Stephen Brennock, an analyst with brokerage PVM Oil Associates.
"Wild swings will be the norm so long as the supply backdrop remains clouded by uncertainty," he said.
In its July monthly oil market report, OPEC's analysis arm estimated demand for the producer group's crude in the fourth quarter would be 1.25 million b/d higher than its June production level.
Either OPEC would need to raise its output by more than it committed to, or crude would have to come out of storage, if it wishes to avoid a market squeeze, the data showed.
That will put the focus on how Saudi Arabia, as the world's primary swing producer, will respond. Aama's statement did not provide any insights on the kingdom's production plans beyond August.
Saudi Arabia "has to manage the demands for greater oil output and lower oil prices from key consumers while being mindful not to jeopardize the OPEC+ accords agreed at the end of June," said Harry Tchilinguirian, head of commodities strategy for BNP Paribas.
--Herman Wang, firstname.lastname@example.org
--Edited by Danierl Lalor, email@example.com