- Brent crude prices rose over 4% to above $105 per barrel amid Saudi supply cuts
- Saudi Arabia's oil production dropped 75,000 bpd in August to 7.28 million bpd
- OPEC and allies raised overall output by 297,000 bpd to 38.06 million bpd in August
Brent crude prices surged to around $105 a barrel on Thursday after Saudi Arabia flagged a sharp slump in oil production, with the market already grappling with disruptions at key shipping chokepoints and escalating geopolitical tensions in West Asia. It jumped 4% to cross $105.13 per barrel as of 6:13 IST.
Brent has surged more than 13% so far this month and is up nearly 70% year-to-date, putting it on track for its biggest annual gain since 2009. The benchmark has also advanced for a fifth consecutive session.
The latest rally comes against a backdrop of already tight inventories. OECD July crude oil stocks stood at 2.76 billion barrels, up 9.8 million barrels from June but still 47.9 million barrels below the latest five-year average.
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Saudi Arabia's August oil production fell to 7.28 million barrels per day (bpd), down 75,000 bpd from July. Russia's output also declined by 160,000 bpd month-on-month to 8.72 million bpd.
The decline in production from two major producers is adding to concerns around available supply even as OPEC and its allies increase overall output.
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The UAE, in contrast, raised August production by 54,000 bpd from the previous month to 3.84 million bpd.
Overall oil output from OPEC and its allies rose by 297,000 bpd in August to 38.06 million bpd. OPEC's own production increased by 346,000 bpd to 24.08 million bpd.
OPEC Raises 2027 Demand Growth Outlook
OPEC has retained its view that non-OPEC oil supply will grow by 600,000 bpd in both 2026 and 2027. However, its demand outlook has changed. OPEC has cut its 2026 oil demand growth forecast to 400,000 bpd from 600,000 bpd earlier.
For 2027, the organisation has raised its oil demand growth estimate to 2.4 million bpd from 2.2 million bpd previously.
The divergent outlooks highlight the uncertainty facing the oil market, with near-term supply disruptions and geopolitical risks being weighed against expectations for global demand and non-OPEC production growth.
Strait Of Hormuz Remains Key Risk
The Strait of Hormuz remains at the centre of the supply concerns. Any sustained disruption to flows through the strategic waterway could have significant implications for global crude availability and prices. Iran has threatened to intensify the conflict, while oil flows through Hormuz have reportedly fallen sharply.
The market is also monitoring the potential impact on Gulf production and refining infrastructure. Any physical damage could compound the supply shock created by shipping disruptions.
The Bab el-Mandeb Strait is another key chokepoint being closely watched by the oil market.
Yemen's Houthi movement has increased pressure around the strategic Red Sea shipping route. Further disruption could raise freight and insurance costs and force vessels to take longer routes, complicating global energy flows.
At the same time, stronger Chinese buying is tightening physical oil markets, providing another source of support for crude prices.
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