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Saudi Arabia Commodities May 2024

Saudi Arabia: Saudi crude output still weak in May; Brent prices fall

Brent crude oil prices averaged USD 83.05 per barrel in May, down 6.7% from April. On 31 May, the commodity traded at USD 81.80 per barrel, down 7.0% from 30 April. Easing tensions between Iran and Israel pushed down prices.

Turning to production, Saudi oil output fell to 9.00 mbpd (million barrels per day) in May from 9.03 mbpd in April, remaining at one of the lowest levels in the past decade.

After contracting 8.6% in 2023, Saudi oil production is set to fall further in 2024—albeit at a slower speed. This is a consequence of the various production curbs agreed with OPEC+ since late 2022; the cartel’s latest move was to extend voluntary production cuts—worth around 1.00 mbpd in the case of Saudi Arabia—in place since January to the end of September from the end of June. The cartel announced that the cuts would then be gradually unwound over the following 12 months.

Looking further ahead, crude output should recover next year as curbs are rolled back. That said, the recovery is now likely to be weaker than earlier expected by the market; on 2 June, OPEC+, as well as extending voluntary cuts to the end of September, also extended an earlier agreement to cap oil output at 39 mbpd until end-2025 from end-2024.

Goldman Sachs analysts said:

“OPEC’s announcements of production cuts when Brent approached the lower end of our $75-90 range (in April 2023, June 2023, and November 2023), and our economists’ estimate that a $75-90 Brent range would leave the Saudi budget deficit in a sustainable 2-6% of GDP range also support the notion of a floor under Brent of around $75/bbl. We still expect 2025 Saudi crude supply of 9.4mb/d.”

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