Saudi Arabia: Oil prices rise in May; OPEC+ agrees to add more oil to market
The OPEC oil basket traded at USD 113.9 per barrel on average in May, up 7.7% from the prior month. Meanwhile, the price was 33.6% higher on a year-to-date basis and was 70.2% higher than on the same day last year.
Crude oil prices rose in May on rising demand from oil refiners and a weaker supply outlook. On the supply side, the EU made a proposal—agreed to on 31 May—to ban most Russian oil on 4 May. 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.
In terms of OPEC production, combined crude oil output among members increased to 28.6 mbpd in April—the latest month of available official data—from 28.5 mbpd in March. This mostly reflected higher output in Saudi Arabia, with falling output in Libya and Nigeria dragging on the final reading.
In early June, OPEC+ agreed to ramp up oil production quotas by 50.0% in July and August, with quotas to be increased by 0.65 mbpd instead of 0.43 mbpd as originally planned. As the only countries with significant spare oil production capacity, Saudi Arabia and the UAE will drive the increase in oil output. The move will allow the two countries to fill the hole in supply left by falling Russian output, which has been hit by the war in Ukraine and sanctions by western countries and allies. However, for now, the impact of the OPEC+ announcement on oil prices has been negligible.