OPEC cuts production by nearly 8 million barrels in a single month; oil prices rebound strongly

OPEC released its latest monthly report on Monday, saying that due to the escalation of the US–Israel–Iran conflict and an effective closure of the Strait of Hormuz, OPEC crude oil production in March experienced a historically large decline.

Data showthat OPEC’s average daily crude production in March fell to 20.79 million barrels, a sharp decrease of 7.88 million barrels/day from February, marking the largest single-month drop on record since statistics began in the 1980s. The previous record was in May 2020 during the COVID-19 pandemic, when OPEC’s daily output contracted by 6.28 million barrels.

Core producers such as Saudi Arabia, the UAE, Iraq, and Kuwait account for roughly 70% of OPEC’s capacity and all faced shipping disruptions. By country:Saudi Arabia’s March daily output plunged by 2.31 million barrels to 7.79 million barrels;Iraq’s capacity shrank by more than 60% due to constraints at storage facilities; Kuwait and the UAE likewise saw their output roughly halved.Thanks to cross-border pipelines and alternative port arrangements, Saudi Arabia and the UAE used Red Sea and Gulf of Oman export routes to ease some transport pressure.

Dragged down by OPEC’s cuts, the OPEC+ grouping, which includes Russia and Kazakhstan,saw daily output fall in tandem by 7.70 million barrels to 35.05 million barrels. On the demand side, OPECrevised down its global oil demand forecast for Q2 this year by 0.5 million barrels per day, while maintaining a positive view for full-year consumption and expecting demand to steadily recover thereafter.

With geopolitical risk continuing to simmer, US–Iran talks breaking down and the US tightening control over the Strait of Hormuz, international oil prices strengthened again on Monday,with Brent crude briefly returning above $100 per barrel. Middle Eastern producers simultaneously raised their official May crude selling prices to Asia, and Saudi light crude’s premium to Asia reached a historic high.

OPEC warned that with the summer travel season approaching and rising gasoline and jet fuel demand, combined with globally low crude inventories, refined product prices and refinery margins will remain strong. Morgan Stanley kept its oil price forecast, noting that even if shipping resumes, it will take months for the global crude supply chain to fully repair and short-term supply tightness will be difficult to reverse.