According to OPEC's latest monthly report on Wednesday, despite Russia's clear reduction in crude oil production in June, the three major OPEC+ member countries of Russia, Iraq, and Kazakhstan still supply daily petroleum higher than the quota set at the beginning of this year by over 100,000 barrels. These countries did not reduce production as promised earlier to compensate for the excess production.
Specifically:
- In June, Russia reduced its daily output by 0.114 million barrels to 9.139 million barrels, which is still 0.161 million barrels higher than its designated quota.
- Iraq's daily output only decreased by 0.025 million barrels to 4.189 million barrels, which is still 0.189 million barrels higher than its quota. Iraq often feels dissatisfied with the restrictions of OPEC+ and seeks more revenue to rebuild the economy.
Under the leadership of Saudi Arabia, OPEC+ has implemented a series of production reduction policies since late 2022 to help balance the impact of a large amount of crude oil supply from the United States and other regions on oil prices. However, OPEC+'s production reduction plan failed to boost oil prices significantly. Certain oil-producing countries of OPEC+ failed to cut production as planned, which brought further resistance to the crude oil market.
OPEC+'s production reduction policy has been relaxed. At the June meeting, it agreed to extend its production reduction policy until 2025, while gradually canceling additional voluntary production cuts from the end of September. This decision has led to a decline in oil prices, and Saudi Arabia and other countries subsequently clarified that the market will eventually recognize the correctness of their latest decisions, and that the organization also retains the option to suspend or reverse production changes when necessary. Since then, oil prices have rebounded significantly.
OPEC+ will hold a monitoring meeting on August 1st.
The International Monetary Fund estimates that oil prices are still too low for OPEC+ member countries, including Saudi Arabia, and that Saudi Arabia needs an oil price of nearly $100 per barrel to make up for its government's huge expenditures.
In its latest monthly report, OPEC still insists on its prediction of relative strong growth in global oil demand this year and next year, believing that resilient economic growth plus air travel will support fuel use during the summer.
Specifically, OPEC expects global oil demand to increase by 2.25 million barrels/day this year and by 1.85 million barrels/day next year, which is consistent with last month's forecast.
Currently, there is a large divergence in views on the strength of oil demand growth this year and in the medium term, partly because of differences in the speed of global transition to clean fuels. Earlier on Wednesday, BP Plc stated that oil demand will peak next year.
OPEC predicts that oil supply shortages will occur in the coming months and in 2025, and the shortage will be greater than the forecast of the US Energy Information Administration (EIA) on Tuesday. OPEC predicts that demand for OPEC+ crude oil will reach 43.6 million barrels/day in the third quarter of this year, far higher than the organization's current output.
OPEC believes that the momentum of economic growth in major economies remained strong in the first half of this year, and it has raised its global economic growth forecast for this year from 2.8% to 2.9%, and says the figure still has potential for further upside, due to strong growth momentum outside the Organization for Economic Cooperation and Development (OECD) developed countries.
On Wednesday, the US Energy Information Administration (EIA) announced that US crude oil inventories last week hit a new low since mid-March. US crude oil inventories decreased by 3.34 million barrels last week, and media surveys expected a decrease of 3 million barrels, while surveyed analysts expected an increase of 0.442 million barrels. The previous value was a decrease of 12.157 million barrels.
On Wednesday, WTI August crude oil futures rose by $0.69, an increase of nearly 0.85%, to $82.10 per barrel. Brent September crude oil futures rose by $0.42, or 0.49%, to $85.08 per barrel.