Data shows that OPEC's crude oil output plunged by 900,000 barrels a day last month to an average of 27.79 million a day. This is the biggest reduction in oil production since the group and its allies, including those in OPEC+, massively slashed supplies during the height of the Wuhan coronavirus (COVID-19) pandemic lockdowns in 2020.
Saudi Arabia is responsible for much of the cutbacks, as Riyadh delivered on most of its promised extra one million barrels-per-day cut in a bid to keep oil prices elevated against lackluster economic data coming out of China and deepening concerns about a recession in the United States. (Related: Saudi Arabia signs $5.6 billion deal with China to boost the kingdom's EV industry.)
Oil prices have already somewhat recovered since 2020 as OPEC continues to throttle global supplies. In London, prices have reached a three-month high of above $85 a barrel as fuel demand continues to surge.
Futures contracts for Brent Crude – one of the main global benchmarks for gauging the price of oil – recently rose by as much as 2.1 percent, trading to near $85 a barrel. U.S. West Texas Intermediate futures were trading at just over $80 per barrel.
The cutback in production brought Saudi Arabia's average production to 9.15 million barrels a day in July.
Nigeria's production also fell by around 130,000 barrels a day to 1.26 million barrels on average. The country planned to bolster production last month, but a leak at the Forcados Oil Terminal Port – which was scheduled to ship an additional 220,000 barrels of crude oil per day in July – thwarted the country's plans.
Libya suffered similar setbacks following protests that briefly halted production at the El Sharara oil field. The country's production slipped by 50,000 barrels a day to 1.1 million a day.
Russia for the longest time has flouted pledges to reduce supplies and exports as it focused on maximizing revenues to fund its ongoing special military operation in Ukraine. But tanker-tracking data shows Russia is finally joining its colleagues in delivering on pledges to lower shipments. The data shows that shipments have dropped to a seven-month low of just under three million barrels a day.
Russian Deputy Prime Minister Alexander Novak said that the country will cut production by 500,000 barrels a day for August and taper this down to 300,000 barrels a day in September.
Traders expect Saudi Arabia to announce an extension of its cutbacks on oil production to keep the measure in place until the end of September, holding production levels at around nine million barrels a day, the lowest level it has been in several years.
Economists note that the kingdom may be looking to raise crude oil prices to as much as $100 a barrel to help Riyadh's increased government spending.
Riyadh introduced the current extra one million-barrel-a-day cut earlier this summer as a unilateral move, joining its colleagues in OPEC and OPEC+, most of whom are already producing well below their assigned targets and unlikely to reduce supplies even further.
But this very focused decision to defend prices in the oil market may end up costing Saudi Arabia more in the long run. The kingdom recently suffered its sharpest downgrade in economic growth projections by the International Monetary Fund. The organization now only sees the country's economy expanding by 1.9 percent, just a fraction of its performance last year.
Riyadh and Moscow are expected to co-chair an online review of market conditions with key OPEC and OPEC+ nations this month. The full alliance is also due to meet in person in late November to discuss oil production for the next year.
Learn more about the state of crude oil production and exports in the world at NewEnergyReport.com.
Watch this clip from the "Worldview Report" as host Brannon Howse talks with author and financial expert Rebecca Walser about OPEC's plan to join BRICS and help kill the U.S. dollar.