Data from the Organization of the Petroleum Exporting Countries (OPEC) indicates that the group's crude oil production fell at a record rate last month, hampered by Middle East conflicts impacting exports from key members. According to an obtained monthly report from the OPEC Secretariat, OPEC's crude output in March plunged by 7.88 million barrels per day (bpd) to 20.79 million bpd. The primary declines originated from Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait. This represents the largest single-month drop since records began in the 1980s.
Conflict between the US-Israel alliance and Iran has led to the six-week closure of the critical Persian Gulf shipping lane, the Strait of Hormuz, forcing oil-producing nations in the region to halt production. Prices for refined products such as jet fuel, diesel, and gasoline have surged in response, threatening the global economy with a wave of inflation. On Monday, Brent crude futures traded near $102 per barrel. This follows US President Donald Trump's pledge, made after failing to secure a diplomatic solution over the weekend, to block Iranian oil exports via the Strait of Hormuz, a move Iran has threatened to retaliate against. The OPEC Secretariat's report did not appear to mention the strait or its closure.
This production collapse exceeds the previous record decline of 6.28 million bpd set in May 2020, when OPEC+ implemented deep cuts due to a collapse in global fuel demand caused by the COVID-19 pandemic. The data is largely consistent with a monthly survey assessment released last week. The report showed Iraq experienced the largest decline in March, with its daily output plummeting by 2.56 million bpd to 1.63 million bpd. Saudi Arabia followed, with its daily production falling by 2.31 million bpd to 7.80 million bpd.
OPEC has revised down its forecast for global oil demand in the second quarter by 500,000 bpd. However, due to an upward revision for demand in the second half of the year, the full-year demand forecast remains unchanged. Prior to the outbreak of war on February 28, major OPEC+ members had been gradually restoring production capacity that was halted years ago. During a monthly video conference on April 5, they agreed to a nominal production increase for May to continue the restoration process. The next meeting is scheduled for May 3.
In early March, OPEC released its February monthly report, which stated that Saudi Arabia significantly increased its crude oil production in February this year, just before the US and Israel launched military strikes against Iran, to mitigate potential supply disruption risks in the Middle East. Simultaneously, OPEC maintained its forecast for relatively strong growth in global oil demand for the year. Saudi Arabia has long played the role of a "swing producer" in the global oil market, increasing output during supply disruptions and cutting production when the market faces a surplus.
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