Saudi Arabia told OPEC it pumped 10.07 million barrels a day in June, a person with knowledge of the data said, exceeding its production limit for the first time since brokering a deal to curb global crude supply to counter a glut.
The world’s biggest oil exporter boosted output from 9.88 million barrels a day in May, surpassing the limit of 10.058 million it accepted in an agreement between OPEC and other major suppliers including Russia. Under the deal reached in December, Saudi Arabia agreed to reduce production by 486,000 barrels a day, the most of any country participating in the cuts. The person with knowledge of the June data asked not to be identified because the information isn’t public.
Saudi Arabia usually boosts production during summer months to meet demand for power for air conditioning, leaving less output for exports. Demand got an extra bump this year in June because of the fasting month of Ramadan, when millions of Muslims visit Saudi Arabia, according to Sadad al-Husseini, a former executive vice president at Saudi Arabian Oil Co., the nation’s main oil producer.
“An increase by this very marginal figure due to these circumstances is justifiable,” al-Husseini said. “Summer demand is high in June.”
Crude has declined 17 percent this year, entering a bear market in June amid concerns that rising world supply will outweigh production cuts from the Organization of Petroleum Exporting Countries and allied producers that took effect in January. The producers decided in May to extend their curbs through March 2018, as the oil market had yet to stabilize. Benchmark Brent crude was 11 cents higher at $46.99 a barrel in London at 3:23 p.m. local time.
OPEC needs to “shock and awe” the oil market with deeper cuts for prices to gain, Goldman Sachs Group Inc. said in a July 10 report. Without such action, and no evidence of sustained declines in inventories as well as U.S. drilling activity, prices could slump below $40 a barrel, analysts including Damien Courvalin and Jeffrey Currie wrote in the note.