Saudi Arabia: Oil prices continue rise in June-July as OPEC output drops to two-decade lows
July 3, 2020
Oil prices recovered noticeably over the past month, hitting a roughly four-month high, as production cuts in May–June curtailed supply and easing lockdown measures in most parts of the world supported demand prospects. On 3 July, the OPEC oil basket traded at USD 42.66 per barrel, marking an 22.1% increase from the same day in June. That said, the price was 32.0% lower than on the same day in 2019 and down 37.2% from the start of the year.
Price gains in recent weeks were mainly attributed to OPEC+ production cuts over the past two months. In June, survey data noted OPEC+ compliance reached 107%, up from May’s 77%. Saudi Arabia, UAE and Kuwait were chiefly behind the reduction in output in June, bringing OPEC oil production close to the lowest level in roughly two decades. Moreover, demand conditions are showing some signs of stabilizing as many parts of Asia, Europe and North America continued to ease lockdown measures.
Going forward, crude oil prices are expected to remain relatively low this year, despite the recent OPEC+ deal, as depressed global economic activity weighs on demand prospects.
In terms of production, combined crude oil output among OPEC members plummeted from 30.5 million barrels per day (mbpd) in April to 24.2 mbpd in May, mostly reflecting lower output from Saudi Arabia, Kuwait and the UAE. Saudi output dropped from 11.6 mbpd in April to 8.5 mbpd in May.
Author: Steven Burke, Economist