Saudi Arabia: Oil prices rise in June
July 1, 2022
The OPEC oil basket traded at USD 117.7 per barrel on average in June, up 3.4% from the prior month. Meanwhile, the price was 38.1% higher on a year-to-date basis and was 63.7% higher than on the same day last year.
Crude oil prices rose in June on rising demand from oil refiners and supply fears. On the demand side, a lack of investment since the start of the pandemic and the summer driving and travel season in the northern hemisphere have tightened the market for oil derivatives, boosting their prices. This, in turn, has boosted demand for crude from oil refiners. On the supply side, oil output in Ecuador and Libya was disrupted by protests.
In terms of OPEC production, combined crude oil output among members fell to 28.5 mbpd in May—the latest month of available data from OPEC—from 28.7 mbpd in April. This mostly reflected lower output in Libya. Rising output in Saudi Arabia and the UAE provided some upward support.
Saudi oil output is set to continue increasing in the months ahead, with the target for August set at 11.0 mbpd following the most recent OPEC+ meeting. The target is likely to be met. That said, it is not certain how much spare capacity Saudi Arabia has further ahead: Riyadh claims it has production capacity of 12 mbpd, but the actual figure may be lower. Reporters said that they had overheard a conversation between French President Emmanuel Macron and U.S. President Joe Biden at the recent G7 leaders’ summit. Macron reportedly stated that he had been told by the UAE’s leader Mohamed bin Zayed al-Nahyan that Saudi Arabia will only be able to ramp up output by 0.15 mpbd in the next six months, much less than officially claimed.