Saudi Arabia’s oil production rose to a record level in July as it moved to meet domestic demand and maintain pressure on regional rivals, with Opec countries still locked in a battle for customers.
Data submitted by the kingdom to the Opec showed output jumped to 10.67m barrels a day last month, up 123,000 b/d on June and surpassing the previous record of 10.56m b/d from June last year.
Saudi Arabia usually pumps more crude oil during the summer months to meet a seasonal increase from domestic power companies trying to satisfy air-conditioning demand.
In July, parts of Saudi Arabia endured record-breaking temperatures above 50 degrees centigrade.
But the kingdom’s oil production is under intense scrutiny after it promised its Opec peers in June that it would not flood the market with its oil. Rival Opec countries will be watching closely to see if it pulls back production once temperatures cool as it did last year, lowering output to around 10.2m b/d between September and May.
Saudi Arabia’s state oil company last week cut export prices for Asian customers by the most in a year, signalling a more aggressive push for customers as it competes with big producers like Russia and Iraq and its regional rival Iran, where exports are rising after the end of years of sanctions.
Demand is also expected to weaken in Asia in October as the refinery maintenance season gets under way.
Oil prices are back under pressure since June amid oversupplied crude and refined product markets after a recovery for much of the first half of the year.
“Lower-than-predicted demand, high refined product stocks during the peak summer driving season and rising crude supply?.?.?.?have all significantly exerted pressure over the month,” Opec said.
Brent crude, the global benchmark, has slid towards $40 a barrel, prompting oil producers such as Venezuela, to rally support for another meeting of Opec and non-Opec countries to agree to measures to prop up oil prices.
An April gathering in Doha failed to reach any agreement to freeze production and no production cap was implemented at Opec’s June meeting in Vienna.
Opec members are scheduled to meet informally in September on the sidelines of an industry conference in Algiers, the group’s president said earlier this week.
“In terms of the group agreeing on a deal that would make a real change to supply, we shouldn’t expect anything,” said Olivier Jakob at consultancy Petromatrix. “Everyone is more or less producing at capacity.”
The group’s output is still well above the estimated level of demand for its crude. In July, total Opec production stood at 33.1m b/d according to estimates by secondary sources such as oil analysts. Opec forecasts demand for its crude to stand at 31.9m b/d in 2016 and 33m b/d next year.
Two years of low prices are starting to reduce supplies outside the cartel with non-Opec production expected to contract by 800,000 b/d in 2016 and a further 150,000 b/d next year.
World oil demand growth in 2016 is expected to average at just over 1.2m b/d, which is 30,000 b/d more than forecast in last month’s report. Next year’s growth of 1.15m b/d stands unchanged.
Although the oil market surplus will ease by more than 1m b/d year-over-year the report suggests the oil market will remain oversupplied by 100,000 b/d on average in 2017. Last month Opec forecast a small deficit for next year.
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