Saudi Arabia’s crude oil production slumped to the lowest in two years as the Kingdom doubled down on efforts to boost prices, the International Energy Agency said in the new edition of its Oil Market Report.
The country’s rate of compliance with the OPEC+ production cut agreement reached 153 percent, the IEA said, adding that this fact, coupled with a sharp drop in production in Venezuela under the weight of sanctions and a string of blackouts, helped reduce global oil supply by 340,000 bpd in March.
According to IEA, Venezuela’s average daily production rate fell to 870,000 bpd last month. This was even lower than the number OPEC reported for its troubled member: 960,000 bpd. However, this was the self-reported production number for the country. Secondary sources calculated Venezuela’s output at even less, 732,000 bpd.
Venezuela is exempted from the cuts because of its troubles, but like in the previous production cut agreement, the country has inadvertently become the main contributor to excellent compliance rates among the cartel members. OPEC-wide production fell by 550,000 bpd in March, the International Energy Agency said in its report.
The cuts, coupled with lower production in Venezuela and possibly Iran, as well as outages in Libya, have helped prices reach a level closer to what OPEC considers desirable in the last three months. However, the rally may end in June, or at least Russia may leave the agreement then, which will pressure Brent and with it, West Texas Intermediate again.
Demand projections, in the meantime, remain unchanged from a month ago in the IEA’s report. The authority said it expected demand growth for oil to be 1.4 million bpd this year, up from 1.3 million bpd last year. Almost all of this will come from countries outside the OECD, with the organization only contributing 300,000 bpd to global demand growth.
By Irina Slav for Oilprice.com
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