Saudi Arabia’s oil production slumps to lowest in 36 years as war bites
The kingdom reported to OPEC that crude output fell by 1.9 million to 6.238 million barrels per day in August.
Saudi Arabia has reported to OPEC that its oil production plunged to its lowest since 1990 last month as the kingdom’s export routes have been squeezed by attacks by Iran and Yemen’s Houthi militia.
What happened: Saudi Arabia, OPEC’s largest producer and one of the world’s largest crude exporters, reported to the cartel’s secretariat that output fell by 1.9 million barrels per day to 6.238 million bpd in August, Bloomberg reported Thursday.
The kingdom’s crude exports also plunged to their lowest in more than a decade, according to data from maritime analytics firm Kpler. Saudi Arabia exported 3.2 million bpd in August, the lowest in 13 years.
Why it matters: The setbacks for OPEC’s de facto leader stem from its main maritime export routes for crude oil being choked off during the Iran war.
Before the Iran war, Saudi Arabia used to ship most of its crude through the Strait of Hormuz, but tanker traffic has fallen sharply since Feb. 28, after the US and Israel started striking Iran. In retaliation, the Islamic Revolutionary Guard Corps began attacking ships in the strategic waterway between Iran, Oman and the United Arab Emirates.
Since then, the kingdom has diverted much of its crude through its East-West Pipeline to its Red Sea port of Yanbu to avoid disruption in the Strait of Hormuz.
However, in July, Yemen’s Iran-backed Houthi rebels declared a maritime blockade of Saudi Arabia, attacking ships and disrupting traffic through the Red Sea and the Bab el-Mandeb Strait, connecting the Red Sea to the Gulf of Aden.
The blockade has further constrained the kingdom’s options for exporting its crude. In the past week, only two Saudi cargoes passed through Bab el-Mandeb, according to Kpler data cited by the New York Times.
The Houthis have also attacked Saudi oil facilities. On Tuesday, the group said it had targeted Khamis Mushait and sites belonging to Saudi Aramco in Abha, Najran and Jizan.
The attacks wounded 73 people and caused fires and temporary operational shutdowns at several sites, according to Saudi authorities.
On Thursday, the Houthis announced that they had retaken Mocha from the UN-recognized Yemeni government. The strategic port lies near the Bab el-Mandeb Strait, strengthening the group’s position along a key route for ships carrying Saudi oil.
The escalation has also pushed oil prices higher, with Brent crude rising to $105.79 a barrel earlier on Thursday. Brent crude, the international oil price benchmark, was at $104.83 as of 8:50 a.m. EDT on Thursday.
Know more: Saudi Arabia’s slump in oil output and exports comes at a particularly fractious time for OPEC.
The United Arab Emirates left OPEC in May following years of frustration with the cartel’s production limits.
Iraq, OPEC’s second-largest producer, also threatened in June to consider leaving the cartel if it was not granted a higher production quota, according to people familiar with the matter.
However, Iraqi Prime Minister Ali al-Zaidi said in July that Iraq would not leave OPEC and was instead seeking a “fair” production quota within the group.
Venezuela, which has the world’s largest proven oil reserves, is also considering whether to leave OPEC, according to Bloomberg. The deliberations come as Caracas opens its oil market to US investment and influence following the arrest of President Nicolas Maduro by US forces in January and the rise of the more US-aligned Delcy Rodriguez. US President Donald Trump said in August that Caracas would ultimately decide whether it would remain in the cartel.
