Pictured above: Saudi Aramco oil storage tanks
(Bloomberg) – Saudi Arabia raised crude output far above its OPEC+ quota last month, joining other producers in a rush to export oil out of the Persian Gulf as Israel went to war with Iran, according to the International Energy Agency.
The kingdom raised crude production by roughly 700,000 bpd to 9.8 million bpd, with about 70% of the additional supply exported, the IEA said in its monthly report. It was a rare breach of agreed OPEC+ limits by Riyadh, which has repeatedly scolded other members for over-production.
Iraq, Kuwait and the United Arab Emirates also raised production and exceeded their OPEC quotas, the IEA said. Iran’s production declined by 400,000 barrels a day in June from a seven-year high to 3.08 million bpd, though the country’s oil infrastructure was largely unaffected by the hostilities.
The flood of extra crude comes as global oil markets head for a substantial surplus. World oil consumption will grow by just 700,000 bpd this year, the slowest pace in 16 years excluding the 2020 pandemic slump, the agency said in a monthly report on Friday. It’s a modest downgrade from the previous month.
Production from outside the OPEC+ cartel will grow twice as fast as global demand, as the US, Guyana, Brazil and Canada continue to boom, according to Paris-based IEA, which advises major economies on energy policy.
Oil futures have slid about 13% since mid-June to trade near $69 a barrel in London, shrugging off the Israel-Iran conflict as signs of oversupply and concerns over President Donald Trump’s trade war weigh on prices.
“Recent months have seen a significant slowdown in oil demand, especially in developing countries,” the IEA said.
The Saudis have steered the Organization of the Petroleum Exporting Countries to revive production faster than scheduled over the past few months, a dramatic break from years of attempting to shore up prices through supply restraint.
Delegates have offered a range of motives for the shift, including a desire by Riyadh to punish overproducing OPEC+ nations like Kazakhstan, or to recapture market share lost to rivals during years of production cutbacks. The IEA estimates the Saudis exceeded their own OPEC+ quota by about 400,000 bpd in June.
Tanker-tracking data had already pointed to a sharp jump in Saudi crude exports last month, prompting speculation that the kingdom and other Gulf nations had sought to re-position supplies outside the region during the Israel-Iran conflict. Yet the IEA report is the first clear evidence that the flood of shipments translated into a major jump in production.
Eight key OPEC+ nations, led by Saudi Arabia, have a tentative plan to restart another 548,000 barrels a day in September, completing the return of a 2.2 million-barrel tranche of halted supplies. The countries plan to take a pause in October before deciding whether to move onto another layer of idled output, delegates said on Thursday.
For the time being, market conditions remain resilient as refiners boost operations to meet seasonal demand for fuels during the northern hemisphere summer, according to the agency.
“Price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances,” the agency noted, pointing to the differences between monthly futures contracts — known as time-spreads — and “healthy” margins for refiners.
But the present tightness is nonetheless set to melt away. World oil inventories are on course to accumulate at a substantial rate of roughly 2 million bpd in the fourth quarter, and 3 million per day in the first quarter of 2026, according to the IEA’s analysis.
