Zhitong Finance APP learned that since OPEC+ began cutting production in May 2020 to rebalance the global oil market, the organization's cumulative oil production has been 562 million barrels less than the level stipulated in the agreement. This has heightened investors' concerns about the organization's ability to balance global oil markets.
In addition, an OPEC+ representative said that the implementation rate of OPEC+ production cuts rose to 256% in May, and the organization's member states' daily oil production in May was 2.7 million barrels per day lower than their total output target. Among them, Saudi Arabia, the largest oil producer, implemented a 128% production cut rate, and Russia, the second largest producer, implemented a 383% production cut rate.
OPEC+ member countries have had a much lower daily oil output than target
As some member countries are still struggling to deal with reduced investment and operational issues, OPEC+ has been having trouble supplying oil to the market at the promised level for months. Idle capacity exists only in a few core member states of the Persian Gulf, such as Saudi Arabia and the UAE. However, these idle capacity is not worth mentioning compared to the capacity losses suffered by Russia after sanctions.
On Monday, French President Macron told U.S. President Biden during the G7 summit that oil production in the UAE and Saudi Arabia is approaching its limit. It is reported that UAE Crown Prince Mohammed bin Zayed revealed to Macron that UAE's production has reached the "highest" level, while neighboring Saudi Arabia can only rapidly increase production by about 150,000 barrels per day, and they cannot increase production significantly in less than six months.
UAE Energy Minister Suhail Al Mazrouei later issued a statement saying that UAE's current oil production is close to the country's reference output cap in the OPEC+ agreement, which is 3.168 million barrels per day. Mazrouei stressed that the UAE's commitment to this ceiling will continue until the end of the agreement. It is reported that the agreement will expire in a few months.
Oil prices continued to rise on Tuesday, driven by supply concerns. WTI August futures closed up 2.00% at $111.76 per barrel; Brent August futures closed up 2.5% at $117.98 per barrel.
At present, there is a lot of uncertainty in the supply side of the oil market. According to people familiar with the matter, G7 is discussing imposing caps on Russian oil prices through insurance and shipping restrictions, but no agreement has been reached. The G7 will also increase sanctions on Russia, and Russia may restrict the export of oil and its manufactured products to Western countries in response to Western sanctions.
On Monday, National Oil Corp (NOC) said that the export of oil from Sirte Bay may be suspended in the next three days as the political crisis continues to worsen. In addition, the Ecuadorian Ministry of Energy warned last Sunday that oil production has reached "critical" levels and that oil production could stop completely within 48 hours if protests and roadblocks continue to exist in the crisis-stricken South American country.
At the same time, the restart of Iran's nuclear agreement negotiations means that more Iranian oil may enter the global market in the future. In addition, OPEC+ will meet on Thursday to discuss the issue of increased production, after sources said OPEC+ may insist on increasing production by 648,000 barrels per day in August to alleviate soaring oil prices and inflationary pressures.
