Saudi Arabia’s oil production fell to 9.6 million barrels per day in July and will stay below 10 million bpd in the coming months, a Saudi oil source told Reuters on Wednesday.
Saudi’s July crude output is lower than its June production by around 200,000 bpd, the source told Reuters.
“We believe now after talking with customers and consumers that the market is getting tighter, as we see that the US commercial stocks are going down,” the source said.
Saudi Arabia’s production target under an output-cutting deal among the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, is 10.3 million bpd.
The kingdom will continue to produce below that level in coming months, the source said, as it seeks to reduce oil inventories.
“Saudi Arabia has a strong commitment to the OPEC+ group decisions and is determined to see lower global oil stocks,” the source said.
Oil prices are expected to be range-bound near current levels this year as slowing economic growth and a protracted trade dispute curb demand, a Reuters monthly poll showed, squeezing gains stemming from production curbs and Middle East tensions.
A survey of 54 economists and analysts forecast Brent crude would average $67.47 a barrel in 2019, little changed from the $67.59 seen in last month’s poll and compared with the $65.88 average so far this year.
On Wednesday, Brent was trading near $65 a barrel.
“World demand remains lackluster and is subject to significant risks of downside revisions due to trade war concerns and disappointing macroeconomic data,” Intesa Sanpaolo analyst Daniela Corsini said.
Earlier in July, OPEC and allies including Russia agreed to extend output cuts until March 2020, seeking to prop up crude prices.
While the group’s agreement is seen putting a floor under prices, analysts say its success in balancing the market is likely to diminish into next year.
The effectiveness of OPEC production cuts “is starting to wane and will have a limited impact on balances heading into 2020”, Edward Bell of Emirates NBD bank said.
Analysts in the Reuters poll forecast global demand to grow by 0.8–1.4 million barrels per day (bpd) in 2019, versus the 0.9–1.3 million bpd projected in June, and continue to see emerging markets in Asia as the main drivers of demand.