OPEC oil production has been dropping and in June it reached a new five year low. The 14-member oil exporting organisation is not able to countervail the losses created by US sanctions on Iran and Venezuela.
As per a Reuters survey, last month OPEC produced 29.60 million barrels per day (bpd), which was below May’s output, down by 170,000 bpd, and the lowest OPEC has pumped since 2014.
As per the recent findings, Riyadh is voluntarily pumping less oil than an OPEC-led supply deal permits it to. It is expected to upset the US President Donald Trump, who has asked the OPEC leader, Saudi Arabia, to increase oil supply in order to keep the prices low. Washington has put an offer for Riyadh to help it manage global oil market, in return of which US would provide it military support against it arch-rival Iran.
Despite reduction in oil supply, the crude oil price has also gone down from $75 a barrel in April to below $63 on Friday. It shows weaker global demand, which fell out due to US-China trade war. It further added to the OPEC’s challenges.
Growing concerns over slowing global economy forced OPEC to agree on extending oil supply cuts until March 2020. It was decided during its meeting earlier this week in Vienna. OPEC’s supply cut is 800,000 bpd, which is to be delivered by all its member nations, except Iran, Libya and Venezuela. OPEC +, which includes Russia and other non-members, agreed in December to reduce the oil supply by 1.2 million bpd from January 1, 2019.
The US reimposed sanctions on Iran, for developing Nuclear program and in November Trump administration pulled out of a 2015 nuclear treaty between Tehran and six world powers. US has been building pressure to bring Iran’s sales down to zero. This month Washington also ended sanctions waivers earlier provided to the importers of Iranian oil.
US sanctions have impacted Iran’s crude exports, which have dropped to less than 400,000 bpd from more than 2.5 million bpd in April 2018.