Saudi crude production tumbles to 36-year low

Saudi Arabia told OPEC that its crude production fell to 6.238 million barrels a day in August, the kingdom’s lowest monthly level since 1990, as renewed fighting involving the United States and Iran disrupted export routes.

The figure, contained in OPEC’s September monthly oil market report, was almost 1.9 million barrels a day below the 8.135 million barrels reported for July. It also slipped beneath the wartime low recorded in April, when Saudi output fell to 6.316 million barrels a day after shipments through the Persian Gulf were sharply curtailed.

The latest fall highlights the continuing strain on Saudi Arabia’s ability to move crude to customers despite possessing more production capacity. The kingdom has been forced to manage output around export constraints affecting both the Strait of Hormuz and Red Sea routes, rather than simply around the production targets agreed with its OPEC+ partners.

Riyadh separately told OPEC that crude “supply to market”, which can differ from production because it reflects movements from storage, stood at 7.122 million barrels a day in August. That was down from 7.417 million barrels a day in July but remained well above August production, indicating that stored crude helped support deliveries while wellhead output was reduced.

OPEC’s secondary-source assessment painted a less severe picture. Estimates compiled from external industry sources put Saudi production at about 7.276 million barrels a day in August, only modestly lower than in July. The gap between the kingdom’s direct submission and the secondary-source estimate underscores the difficulty of measuring Gulf production and exports during a period of disrupted tanker movements and opaque shipping activity.

Saudi crude exports were estimated at roughly 3 million barrels a day during August, around one-third lower than the previous month and the weakest level in years. Shipowners have faced heightened security risks across the region, while traffic through Hormuz has remained far below normal levels. Saudi Arabia has relied heavily on its East-West pipeline to move crude to the Red Sea port of Yanbu, bypassing Hormuz.

That alternative route has also come under pressure. Threats and attacks linked to Yemen’s Houthi movement have complicated navigation around the Bab el-Mandeb strait, the southern gateway to the Red Sea. Saudi loadings from Yanbu weakened during August before showing signs of recovery in early September, according to ship-tracking data.

The production decline came despite OPEC+ having raised Saudi Arabia’s required output level as part of a phased unwinding of voluntary cuts. Seven participating countries, including Saudi Arabia, agreed in August to increase their collective target by 188,000 barrels a day for September. They decided on September 6 to keep those September production requirements unchanged for October.

The widening gap between quota settings and actual Saudi supply illustrates how geopolitical disruptions have overtaken production policy as the main constraint on barrels reaching the market. OPEC+ can raise targets, but those adjustments have limited effect when producers cannot safely ship the additional crude.

Oil prices responded to the renewed supply concerns. Brent crude climbed above $100 a barrel this week and traded above $105 on Thursday as attacks on tankers and reduced flows through key Middle East waterways intensified fears of further losses. West Texas Intermediate also moved above $100.

The broader OPEC supply picture has become more uneven. Production among the group’s members fell in August as Saudi losses and weaker Iranian shipments offset increases elsewhere. Iraq raised output, while Iran’s exports remained constrained by the conflict and US measures aimed at restricting its oil trade.

The US Energy Information Administration estimated that Middle East crude production shut-ins averaged 6.7 million barrels a day in August, up from about 5 million barrels a day in July. It expects disruptions to remain substantial through the fourth quarter as producers expand alternative routes and tanker operators adapt to the security environment.