Saudi Arabia told OPEC that it pumped a record 10.67 million barrels of oil a day in July to meet a summer surge in domestic demand, an increase that will do nothing to endear the group’s leading exporter to other members seeking output limits to shore up prices.
The figures were submitted to the Organization of Petroleum Exporting Countries, according to two people with knowledge of the data, who asked not to be identified because the information hadn’t yet been made public. The output beat the previous all-time production high of 10.56 million barrels a day in June 2015, according to OPEC submissions. The group confirmed the figure later Wednesday in its monthly report.
OPEC will hold informal talks at a conference in Algiers next month, as members constantly discuss ways to stabilize the market, Mohammed Al Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said Aug. 8. Russia, Saudi Arabia and other major oil exporters met in Doha in April in a bid to stabilize markets by putting caps on output. The effort collapsed after Saudi Arabia demanded that rival Iran be a part of the deal. At the time, Iran had ruled out any limits on its output as it ramped up after the lifting of international sanctions.
“It’s not surprising to see Saudi output at record,” said Anas al-Hajji, an independent analyst and former chief economist at NGP Energy Capital Management LLC in Houston. “The Saudis didn’t want to cut back on exports and they needed to produce more to meet local summer demand. Also, the Saudis are processing more crude this year at refineries as they want to grow in the products market.”
Power demand in the Middle East peaks in the hottest months of July and August, when Saudis turn up their air-conditioners to cool homes and offices. Saudi Arabia was planning to boost crude production to 10.5 million barrels a day for the 2016 summer, a person with knowledge of Saudi output policy said in April.
Gasoline shipments from Saudi Arabia, the world’s biggest crude exporter, grew to 213,000 barrels a day on average between January and May, up by 76 percent from the same period a year ago, according to figures from Joint Organisations Data Initiative compiled by Bloomberg.
Saudi Arabia’s increased crude output comes as Russia and Iran are boosting shipments to the biggest markets such as India and China. Iran has boosted crude output to 3.85 million barrels a day and plans to keep raising production to 4.6 million barrels in five years, Fars news agency reported Wednesday, citing comments made by Oil Minister Bijan Namdar Zanganeh at parliament.
Any talk about a new oil-production freeze is premature and amounts to wishful talking up of the market as long as Russia, Saudi Arabia and Iran keep boosting output, said Mohamed Ramady, a London-based independent analyst and former professor of economics at the King Fahd University of Petroleum and Minerals.
After years of dominating crude sales to the Chinese market — the world’s biggest — Saudi Arabia is being challenged by Russia. The Asian country’s monthly imports from the Middle Eastern kingdom have been exceeded by purchases from Russia seven times since May 2015, customs data compiled by Bloomberg show.