August 19, 2022
Saudi Arabia: Oil prices fall in July on recession fears

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The OPEC oil basket traded at USD 109.3 per barrel on average in July, down 7.3% from the prior month. Meanwhile, the price was 28.0% higher on a year-to-date basis and was 48.6% higher than on the same day last year.

Crude oil prices fell in July on growing fears of a global recession amid rising inflation and interest rates. The U.S. economy contracted for the second quarter running in Q2, while the Chinese manufacturing PMI fell into contractionary territory in July due to Covid-19 flare-ups and slowing external demand.

In terms of OPEC production, combined crude oil output among members rose to 28.7 mbpd in June—the latest month of available data from OPEC—from 28.5 mbpd in May. This mostly reflected higher output in Saudi Arabia. Falling output in Libya dragged on the print.

Saudi oil output is set to continue ticking up in the months ahead. Nevertheless, it is uncertain whether the target for August—set at 11.0 mbpd at the most recent OPEC+ meeting—will be met. Riyadh claims it has a production capacity of 12.0 mbpd, but the actual figure may be lower. Saudi Arabia has been undershooting its OPEC+ quota in recent months, and OPEC figures indicate that oil well drilling activity remains well below pre-pandemic levels.

FocusEconomics Consensus Forecast panelists expect oil production in Saudi Arabia to average 10.60 mbpd in 2022. In 2023, our panel of analysts sees crude output increasing to 10.99 mbpd.

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