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OPEC countries fulfill their obligations under oil production cut deal by 97% in July

The oil production increased by 0.98 million barrels per day
OPEC headquarters

MOSCOW, August 12. /TASS/. Oil production in OPEC countries in July increased by 0.98 million barrels per day (bpd), to 23.17 million bpd, mainly due to Saudi Arabia that added 1 million barrels to its daily production, which it voluntarily reduced in June, according to the OPEC report.

Thus, oil production in Saudi Arabia increased by 0.86 million bpd - up to 8.4 million bpd. At the same time, Saudi Arabia fully fulfilled its obligations under the OPEC+ agreement.

In June, the United Arab Emirates and Kuwait also took on additional reduction volumes to their obligations. In aggregate, the three of them reduced production by 1.1 million bpd.

In July, the UAE increased production by 98,000 bpd bringing it to 2.43 million bpd, while Kuwait added 73,000 bpd and produced up to 2.16 million bpd. July production in both Gulf states is also fully in line with the OPEC+ agreements.

Meanwhile, Iraq increased oil production in July - by 39,000 bpd to 3.75 million bpd, which is higher than its production quota established at 3.59 million bpd.

Only ten OPEC member-states cut oil production under the OPEC+ agreement. Iran, Libya and Venezuela are freed from restrictions due to the sanctions imposed on them and the difficult internal political situation there.

In June, OPEC countries fulfilled the agreement by 112% of the plan. At the same time, according to OPEC, Russia produced 8.75 million bpd in June and 8.8 million bpd in July. This is higher than the level of 8.5 million bpd, which is stipulated for Russia by the agreement.

The updated OPEC+ agreement on the reduction of oil production has been in effect since May. Until the end of July, the countries of the alliance were to reduce oil production by 9.7 million bpd, with each country's quota being reduced by 23% from the base level. Since August and until the end of the year, they are to cut oil production by only 7.7 million bpd. Russia, which curtailed oil production in May-June by 2.5 million bpd, may increase it by 0.5 million bpd from August. However, Russian Energy Minister Alexander Novak said that the real production growth will be 0.4 million bpd.

Non-OPEC oil output

Production of liquid hydrocarbons (oil and gas condensate) in non-OPEC countries will decrease by 3.03 mln barrels per day in 2020 compared with the previous year, whereas in 2021 it is expected to rise by almost 1 mln barrels per day, the cartel said in its August report released on Wednesday.

Non-OPEC liquids production growth in 2020 has been revised up by 235,000 barrels per day compared with the previous report.

"Non-OPEC liquids production in 2021 is revised up by 66,000 barrels per day and is now expected to grow by 0.98 mln barrels per day, mainly due to a better-than-expected recovery in production of Canada," OPEC said.

Total non-OPEC crude oil supply in Q2 2020 dropped by around 6 mln barrels per day, the organization said, adding that it will shift to growth in Q3, particularly in August.

"Nevertheless, uncertainty surrounding financial and logistical constraints for US production, as well as a potential second wave of COVID-19 infections globally, remains a concern," the report said.

Outlook on global oil demand decline in 2020

OPEC has downgraded its outlook on global oil demand decline in 2020 by around 100,000 barrels per day due to economic slowdown in a number of countries. Particularly, OPEC projects a decline in global demand by 9.06 mln barrels per day this year (July’s report projected 8.95 mln barrels per day), according to the report.

According to OPEC, global oil demand will stand at 90.63 mln barrels per day this year. Meanwhile, OPEC projects growth of global oil demand by 7 mln barrels per day to 97.6 mln barrels per day as early as in 2021 as it expects the coronavirus to be localized with its shattering impact on the global economy stopped.

Despite the fact that the economy is starting to recover, OPEC doubts that oil demand will return to the pre-pandemic levels next year due to changes on the labor market and the spread of the remote working practice.