Drop suggests the group’s members have largely made good on a pledge to reduce their collective output
The Organization of the Petroleum Exporting Countries accelerated its efforts to tighten the oil market in May, as a handful of the group’s largest members sharply slashed output in line with planned cuts.
Output from OPEC’s thirteen members slumped by 464,000 barrels a day to 28.07 million barrels a day, the cartel said in its monthly market report, citing figures sourced from independent data providers.
The drop suggests the group’s members have largely made good on a pledge announced in April to reduce their collective output. But the figures also show an uptick in production from other members who aren’t party to the plan that could soften the cuts’ impact on oil prices.
OPEC and a collection of Russia-led allied nations—known collectively as OPEC+—pledged in April to reduce oil production by around 1.1 million barrels a day from May onwards. Russia said it would extend an already announced 500,000 barrel-a-day production cut.
The cuts, agreed between only a handful of the group’s members and not made through its official decision-making body, were deemed ‘voluntary cuts’, leaving it unclear how strictly the members involved would stick with them.
Saudi Arabia, OPEC’s de facto leader and largest producer, slashed its output by 519,000 barrels a day last month, slightly more than the half-a-million barrel cut it had announced. The United Arab Emirates also cut output by 140,000 barrels a day, largely in line with its agreed voluntary cuts
Kuwait reduced output by 95,000 barrels a day, falling short of its planned 128,000 barrel-a-day cut. Iraq, which had pledged to reduce output by over 200,000 barrels a day, saw its output tick slightly higher as supply disruptions at a major pipeline eased.
Still, the cuts’ impact on oil prices could be undermined as members of the group not party to the voluntary cuts boosted their output. Nigeria and Angola, which have long struggled to meet their output targets due to a lack of investment, lifted their production by 171,000 barrels a day and 54,000 barrels a day in May.
Iran, which is exempt from OPEC’s system of oil production quotas, increased its output by 61,000 barrels a day. Libya and Venezuela, two OPEC members who are also exempt and whose oil industries have been beset by problems, also saw their output inch upwards.
Oil prices held onto a modest rally following the report. Brent crude oil, the international oil benchmark, rose 2.2% to $73.41 a barrel. Oil prices have largely shrugged at the planned cuts, despite the risk that they could sharply tighten the market later this year. Brent crude prices have shed around 15% this year.
Oil prices have also slipped in recent days despite a more recent Saudi plan to unilaterally slash its oil output by an additional 1 million barrels a day that was announced earlier this month.
Separately, the oil producers group lefts its forecasts for global oil supply and demand largely unchanged. That means the group continues to expect a sharp run-up in demand later this year that supplies will struggle to keep pace with, raising the prospect of higher oil prices.
OPEC expects global oil demand will grow by 2.3 million barrels a day this year to 101.91 million barrels a day. Meanwhile, oil supplies from non-OPEC nations will grow by 1.4 million barrels a day to 72.61 million barrels a day.
The group also made no major changes to its forecasts for global economic growth, which it continues to see at 2.6% this year. China’s economy is forecast to grow by 5.2% in 2023, while the eurozone is expected to grow by 0.8%, in line with earlier forecasts. The exception was the U.S. economy, which OPEC now expects to grow by 1.3% this year, up from last month’s 1.2% forecast.
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