Saudi Arabia’s crude oil production
Saudi Arabia is OPEC’s largest oil producer. Reuters estimates that Saudi Arabia’s crude oil production increased by 700,000 bpd (barrels per day) to 10,700,000 bpd in June—compared to the previous month. Saudi Arabia’s production is at the highest level since November 2016.
The news of near-record production from Saudi Arabia pressured oil prices on July 2. Brent and US oil prices fell 2.7% and 0.3%, respectively, on the same day.
The iShares US Energy ETF (IYE) fell ~1.7% on July 2. The index is composed of US companies in the energy sector. Core Laboratories (CLB), Superior Energy Services (SPN), Ensco (ESV), and Rowan Companies (RDC) fell 10.7%, 7.1%, 4.7%, and 4.6%, respectively, on July 2. These stocks were the top percentage losses in IYE’s portfolio during the same period.
Saudi Arabia and crude oil prices
Brent and US oil prices have risen ~73.5% and ~74% since June 21, 2017, partly due to major producers’ self-imposed supply cuts. Saudi Arabia wanted higher oil prices because the country’s economy primarily depends on crude oil export revenues. Higher crude oil prices will be crucial to help transform Saudi Arabia’s economy.
Saudi Arabia and President Trump
On June 30, President Trump said that Saudi Arabia should increase its oil production to 2 MMbpd (million barrels per day) in order to offset the drop in production from Libya, Venezuela, and Iran.
Saudi Arabia said that it would pump more oil in order to keep the oil market stable. Saudi Arabia also said that it would use its spare crude oil production capacity to pump more oil. Saudi Arabia has 2 MMbpd of spare crude oil production capacity, according Reuters.
Expectations of record oil production from Saudi Arabia could pressure oil prices. The rise in production from other OPEC members, Russia, and the US could also weigh on oil prices.
Read Saudi Arabia and Russia Could Change the Tone for Oil Prices and Decoding Important Drivers for US Natural Gas Prices for crude oil and natural gas updates.