Bloomberg: OPEC Production Reaches 30 yr Highs Amid Russian-Saudi Price War

May 8, 2020
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AEGIS View: OPEC purposefully overproduced in April, knowing that demand was severely shrinking.

“Production from the Organization of Petroleum Exporting Countries soared by 1.73 million barrels a day in April, the biggest monthly increase since September 1990”

Bloomberg, 5/1/2020

Source headline and article (opens in new tab): OPEC Output Surged Most in 30 Years During Price War Last Month

Article Summary

  • Saudi Arabia continued producing crude at record levels, even after OPEC+ reached an agreement on April 12 to reduce supply
  • Saudi Arabia’s decision to maintain record production worsened the glut already present in the oil market during the month of April
  • The organization pumped 30.36 million barrels a day in April — almost four times the amount they need to produce on average this quarter, IEA data shows


OPEC’s decision to increase production to record levels intensified the glut currently facing today’s over-supplied crude market. According to Bloomberg calculations, 100 MMBbls of unneeded supply entered the market during April, when storage capacity was filling rapidly. The 100 MMBbls represents a significant portion of global storage capacity, which is estimated to be around 1.2 billion barrels, per IHS Markit.

OPEC increased production by a record 1.73 MMBbl/d during April, with Saudi Arabia responsible for 1.4 MMBbl/d (80%)

Production surged last month as OPEC countries, specifically Saudi Arabia, made a grab for market share (see chart above). This escalation began on March 6 when supply-cut negotiations between Russia and Saudi Arabia failed. On March 8, in response to the negotiation’s fallout, Saudi Arabia launched an all-out price war offering steep discounts of between $6 to $8/Bbl to customers in Europe, Asia, and the United States. Saudi Arabia also increased production to around 11.4 MMBbl/, their highest production rate on record.

On April 12 OPEC+ finally reached an agreement to cut production, by 10 MMBbl/d. The agreement to curb production would not begin until May, allowing OPEC+ countries to continue producing until then.
But while OPEC+ reached an agreement on supply cuts, countries were continuing to increase production ahead of the effective date in an attempt to acquire greater market share.

Saudi shipments in April rose by 1.95 MMBbl/d, up 26% from March. Later in the month, some OPEC countries took preemptive steps to begin compliance with the cuts. However, these actions may have been only because of a lack of customers and storage space forced them to do so (Bloomberg).

Bottom Line

In our view, supply increases by Saudi Arabia and to a lesser extent, the other members of the cartel were horribly mistimed and did significant harm to crude prices. With demand destruction caused by COVID-19 estimated to be around 30 MMBbl/d, adding 1.73 MMBbl/d of supply forced the market to deal with two unprecedented supply-demand crises simultaneously. Even the subsequent supply cuts by OPEC+ are dwarfed by the demand lost from COVID-19. Globally, the markets are forcing participants to cut production without intervention as the popular adage “the cure for low prices is low prices” holds true.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at

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