Kuwait Oil Production Surges as OPEC+ Completes Output Cut Reversal

Kuwait produced 1.971 million barrels of crude oil daily in July, Reuters has reported, citing unnamed sources. That was up from 1.65 million barrels daily in June, the report noted, which in turn was up from just 580,000 barrels daily in May. The report supports earlier coverage suggesting oil is still moving out of the Persian Gulf, which would strengthen bearish sentiment among traders. However, the fact that any oil flows via the Strait of Hormuz are considerably lower than pre-war levels should be kept in mind. The news about Kuwait coincides with OPEC's latest meeting, at which the group said it would boost production targets by another 188,000 barrels daily from September. With this, OPEC effectively unwinds the last portion of its production cuts agreed in 2023 to balance the market in a way favorable for member states. OPEC has been unwinding the cuts since spring, but most of that has only been on paper as the Strait of Hormuz blockade has prevented the normal flow of crude oil out of the Gulf states. Theoretically, OPE should in September produce 1.65 million barrels daily more than it did in 2023. In practice, this would be challenging because the situation with security in the Persian Gulf is not much better than it was in March, although some tanker traffic is being reported. Saudi Arabia, for instance, has been forced to reroute its exports twice now, first from the Strait of Hormuz to Bab el-Mandeb in the Red Sea and then from the southern chokepoint north to the Suez Canal because of the Yemeni Houthis. Kazakhstan is also struggling to boost its production - it is, in fact, falling because of Ukrainian drone attacks on the Russian Black Sea port of Novorossiysk, which handles some 80% of Kazakhstan's oil exports. The attacks have led to repeated suspensions of oil flows via the Caspian Pipeline Consortium conduit, forcing Kazakhstan to slash oil production to about 1 million bpd in late July, down from over 2 million barrels daily in June. By Irina Slav for Oilprice.com