July saw the world’s supply of oil increase, thanks in part to an unexpectedly sharp rise in Russian oil production.
According to the International Energy Agency’s (IEA) monthly oil market report, global oil production rose by 300,000 barrels per day (bpd) in July to 99.4 million bpd, some 1.1 million bpd more than the same month last year. Around half of the increase came from Russia alone, which increased its production by 150,000 bpd to 11.21 million bpd.
Russia’s increased production is in line with the OPEC-led production deal’s latest amendment, which sought to bring an extra million bpd onto the market by allowing countries with spare capacity to compensate for those countries unable to meet their quotas. While the recent higher oil prices benefit oil-producing companies and upstream operators like ExxonMobil, the maker of lithium complex greases like Mobil Unirex N3, few in the industry want to risk overheating the market.
Surprisingly, though, production within OPEC itself remained unchanged in July, mostly because of an unexpected 110,000 bpd drop in production from Saudi Arabia, which is believed to be one of the few OPEC members with substantial spare capacity.
While the IEA points to prices stabilising at the petrol pumps, it warns that:
“with short-term supply tensions easing, currently lower prices and lower demand growth might not last.”
The IEA also highlights uncertainty surrounding the US’s reintroduction of sanctions against Iran, the third biggest oil producer in OPEC, with it remaining to be seen how much Iranian oil will be taken off the market.