Saudis' Biggest Oil Surge in 5 Years Barely Steadies OPEC

(Bloomberg) -- Saudi Arabia's biggest oil-production surge in five years was only enough to keep OPEC's output steady last month, as losses elsewhere in the group piled up.

The kingdom is delivering on its promise to try and tame crude prices, boosting output by 330,000 barrels a day in June to 10.3 million a day, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That's the biggest monthly jump in production since July 2013.

But disruptions in Libya, coupled with ongoing supply losses in Venezuela and Angola, meant overall output from the Organization of Petroleum Exporting Countries rose only 30,000 barrels a day to 31.83 million a day.

With oil prices at their highest in more than three years, Saudi Arabia -- OPEC's biggest member -- is under intense political pressure from U.S. President Donald Trump to cool the rally and ease the strain on the global economy. That pressure is set to grow as Trump hits the Saudis' political nemesis, Iran, with sanctions and urges the kingdom to fill the gap in supply.

The survey shows the scale of the challenge the Saudis face. Even before sanctions make a dent in Iranian exports, losses are accumulating in OPEC's other troubled members.

Venezuela's output has sunk to the lowest in decades as a spiraling economic crisis engulfs the country's oil infrastructure. In Libya, renewed political clashes have led to control of oil ports passing to a faction that opposes the state oil company. On Thursday, the North African producer said it may suspend loadings at two key ports.

To see the survey data, click here.

The question now is how much more the Saudis will need to produce to keep markets in balance. Forecasts from the International Energy Agency suggest that simply satisfying higher demand in the second half of this year will require more supply, and that cutbacks to Iranian or Venezuelan production would only add to Saudi Arabia's burden.

That could require the kingdom to pump at maximum capacity of 12 million barrels a day for the first time ever. President Trump said in a tweet at the weekend that King Salman bin Abdulaziz had assured him the kingdom would do so, though the White House subsequently moderated that assertion.

Export data for Saudi Arabia also shows the kingdom is pushing more barrels onto world markets. Shipments climbed to a 15-month high of 7.47 million barrels a day last month, up 320,000 barrels from May, according to preliminary Bloomberg calculations from vessel-tracking and ship-fixture data.

The Saudis' resolve to fill in the supply gap is creating friction within the organization. Iran -- which faces the prospect of losing customers to their political rivals in Riyadh -- has said the kingdom has no right to increase production much further, as individual country production limits set in late 2016 still apply.

Based on those quotas, Saudi Arabia produced about 240,000 barrels a day over its limit in June.

“Saudi Arabia will increase production,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “Iran is likely to see any further increase as a grab on its market share.”

--With assistance from Wael Mahdi, Julian Lee, Arsalan Shahla, Mohammed Aly Sergie, Elisha Bala-Gbogbo, Salma El Wardany, Stephan Kueffner and Anthony DiPaola.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Rakteem Katakey, Helen Robertson

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