Riyadh pumped a record amount of oil last month, according to its most recent release of self-reported data. The 10.67 million barrels per day the Saudis pumped in July was an all-time for the petrostate. The FT reports:
Data submitted by the kingdom to the Opec showed output jumped to 10.67m barrels a day last month, up 123,000 b/d on June and surpassing the previous record of 10.56m b/d from June last year. […]
[T]he kingdom’s oil production is under intense scrutiny after it promised its Opec peers in June that it would not flood the market with its oil. Rival Opec countries will be watching closely to see if it pulls back production once temperatures cool as it did last year, lowering output to around 10.2m b/d between September and May. […]
The group’s output is still well above the estimated level of demand for its crude. In July, total Opec production stood at 33.1m b/d according to estimates by secondary sources such as oil analysts. Opec forecasts demand for its crude to stand at 31.9m b/d in 2016 and 33m b/d next year.
The Saudis are sending a clear signal that they’re still intent on following the strategy they embarked upon two years ago when oil prices first began their tumble from their June 2014 high of over $115 per barrel, choosing to fight for market share rather than cut output in an attempt to set a floor to prices. Now, 26 months later, the Saudis’ share of the global oil market remains more important to them than a robust oil price.
But the rest of OPEC won’t be nearly as sanguine about this latest report. The cartel’s influence is near an all-time low and cooperation between its members seems unlikely as mistrust festers in today’s bearish market. As the de facto leader of OPEC, the Saudis’ booming production signals a complete lack of interest in coordinating production, a fact that won’t go over well with some of OPEC’s more cash-strapped members.
And for the market, this suggests that the oversupply that has helped push prices to their current levels is going to continue for the foreseeable future. Recently renewed mutterings of a freeze deal won’t do anything to cut petrostates’ output, and American shale producers are preparing for a rebound. Barring a major supply disruption, it seems like cheap oil is here to stay.