Oil production decreased substantially in May, with total liquids production averaging just 89.89 million barrels per day (bpd), a monthly drop of 10.04 million bpd.
The COVID-19 pandemic and the resulting economic shutdowns around the world have hit oil demand hard, resulting in a supply glut and very low oil prices for producers, such as lubricant makers Shell and Total. Production cuts are therefore needed to rebalance supply and bring some stability to the market.
In its report, OPEC notes the economic effect of the coronavirus pandemic and its effect on limiting any growth in oil demand, adding:
“Transportation fuels are projected to be under pressure during 2020 as lockdowns in various countries particularly the US, Europe, India and the Middle East reduce demand for gasoline and jet fuel, as air travel and distances travelled are anticipated to significantly decline compared with a year earlier.”
In the OPEC group alone, crude oil production fell by 6.3 million bpd in May compared with April, with liquids production from other countries falling by some 3.74 million bpd. Many nations also already decreased production in April to support the markets as the novel coronavirus crisis unfolded. Saudi Arabia, for example, cut its daily crude production by 3.16 million bpd, while Kuwait dropped its production by 921,000 bpd.
The world’s demand for oil is now expected to average 90.59 million bpd this year, a drop of 9.07 million bpd compared to last year, but the lower production level should help tighten the market over the year.