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Saudi Arabia: OPEC oil prices hit lowest level since 2009

September 9, 2015

Oil prices have taken another nose-dive in recent months due to a variety of factors that are at play and, on 25 August, the average price of the Organization of Petroleum Exporting Countries (OPEC) oil basket stood at USD 40.5 per barrel. The reading marked a 22.3% decline over the same day of the previous month and marked the lowest price since February 2009. On an annual basis, oil prices were down by 59.2%. In the following days, oil prices recovered some of the ground lost and traded at USD 47.8 per barrel on 1 September.

Oil prices had begun to recover at the outset of the year following the plunge observed since mid-2014, which drove prices to tumble from USD 110 per barrel to less than 50 USD per barrel, yet crude costs began plummeting again in July. A series of factors contributed to the oil-price plunge seen in July and August. Expectations of a sharp increase in oil supply following the successful nuclear deal between Iran and international powers put downward pressure on oil prices. This situation was exacerbated by fears that the Chinese economy was slowing at a faster pace than previously thought, as the world’s second-largest economy experienced high volatility in the equity markets, decided to devalue the yuan and posted weak economic indicators. Moreover, key OPEC players were pumping oil at record levels, thereby contributing to the global glut.

In the very last days of August, oil prices moved upward amid rumors that OPEC was willing to talk about reducing crude output and that the U.S. shale boom was fading. Nevertheless, the overall picture suggests that global crude markets remain oversupplied due to faltering demand and high production levels.

OPEC pumped 31.51 mbpd in July despite the fact that the oil cartel had decided to maintain its oil production quotas at 30 million barrels per day (mbpd), according to the latest OPEC Monthly Oil Market Report. The rise reflected stronger production in Angola, Iran, Iraq, Saudi Arabia and the United Arab Emirates. Saudi Arabia’s oil production reached 10.35 mbpd in July, which was up from the 10.31 mbpd tallied in June.

FocusEconomics Consensus Forecast panelists expect oil production to reach an average of 10.01 million barrel per day this year. In 2016, our panel of analysts sees crude output broadly stable at 10.00 barrels per day.

Author: Ricard Torné, Lead Economist

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Saudi Arabia Commodities Chart

SaudiArabia Commodity August 2015

Note: Price of the OPEC oil basket in USD per barrel.
Source: Organization of the Petroleum Exporting Countries (OPEC).

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