The Organisation of Oil Producing Countries or OPEC kept its production steady in June, a Bloomberg report said. According to the report, the 13-member OPEC on an average produced 28.57 million barrels a day, a modest rise of 80,000 barrels a day from May.
However, oil production in July is expected to decline as Saudi Arabia is expected to cut oil production by another 1 million barrels per day. The oil-rich kingdom is likely to continue with its additional oil cut in August too, media reports said.
It is not just the world’s biggest oil producer that has decided to further cut oil production. Russia, another major oil producer, which has been under Western sanctions after the Ukraine war, has also promised to cut its oil exports by 500,000 barrels per day in August.
In April this year, OPEC+, which includes the OPEC countries and Russia, agreed to voluntarily cut their oil production from May onward. As per reports, the grouping had decided to cut oil production by 1.15 million barrels per day.
The oil producers’ grouping has been cutting oil supply to lift up prices since November last year due to weaker Chinese demand and rising US supply. However, it been unable to move oil prices from the range of $70-$80 a barrel.
Initially, there were expectations that the output cut will add pressure on the global oil prices. However, oil prices have dipped about 12 percent in 2023. That is largely due to a lackluster post-pandemic recovery in China and fears of a global recession later this year.
While rising oil prices add to the inflationary pressure across the world, it is good news for top oil producers like Saudi Arabia. The West Asian kingdom is heavily dependent on oil to manage its government budget.
According to the International Monetary Fund, Saudi Arabia needs global oil prices to be over $80 in order to balance its yearly budget.
(With inputs from agencies)
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