On April 15, OPEC+ producers agreed to cut crude oil supply in response to a rapid build in global oil inventories in the first quarter of 2020. At the time, demand for petroleum liquids plummeted due to restrictions aimed to contain the spread of coronavirus, resulting in lower crude prices. OPEC+ producers began collectively slashing production by 9.7 million bpd in May 2020. However, the cuts have been eased to 7.7 million bpd last month.
According to the US Energy Information Administration (EIA), OPEC total crude oil output fell by 6.0 million bpd over April through May, the sharpest monthly production decrease since 1993. Production from partner countries dropped by about 5.9 million bpd in May, 7.9 million bpd in June, 7.1 million bpd in July, and 5.6 million bpd in August, compared to the output in January. OPEC members Iran, Venezuela, and Libya, were exempt from the supply reduction deal due to economic sanctions or internal political unrest.
EIA estimates that the OPEC+ pact, along with reductions by other producers, brought global supply lower than demand for the first time since the middle of last year. This has led to significant draws in global liquid fuels stockpiles since June. According to EIA’s estimates, inventories will continue declining in the second half of this year and during most of next year. Therefore, the global oil market is expected to be more balanced by the end of 2021.
