Saudi crude oil exports were hit by a double whammy, with OPEC production falling by 900,000 barrels per day in August.

Saudi Arabia's export routes were disrupted, coupled with continued attacks by the Houthi rebels in Yemen, causing OPEC crude oil production to fall back into decline in August after rebounding for two consecutive months, with Brent crude futures approaching the $100 per barrel mark.

According to Bloomberg, OPEC's average daily crude oil production fell by 900,000 barrels in August, down to 19.91 million barrels. Saudi Arabia's production plummeted by over 1 million barrels in a single month, while slight increases in production from Iraq and Venezuela only partially offset the decline.

Meanwhile, the Houthi rebels claimed responsibility for a new round of attacks on targets inside Saudi Arabia on Tuesday, forcing the country to shut down several energy facilities in the south. Iran claimed that US missiles struck an oil tanker near Kharg Island and warned of attacks on oil tankers in the Kuwaiti port of Bahrain. Brent crude rose 2.4% on Tuesday, breaking through $99.

In Venezuela, the United States announced it would acquire majority control of a significant portion of the country's oil assets, and Caracas is closely assessing the possibility of leaving OPEC. This move, occurring just months after the UAE's shock withdrawal, has further deepened the rifts within OPEC and added more uncertainty to the outlook for the crude oil market.

Saudi production fell to a five-month low, and exports plummeted by a third.

According to data from a Bloomberg survey, Saudi Arabia’s crude oil production fell by 1.12 million barrels per day to 6.98 million barrels per day in August, the lowest level since May of this year.

Saudi Arabia's export difficulties stem from two directions: the escalating attacks on oil tankers in the Strait of Hormuz are disrupting shipments from the Persian Gulf; and the threat from the Houthi rebels in Yemen is also hindering Saudi Arabia's alternative export route via the Red Sea.

According to preliminary tracking data compiled by Bloomberg, Kpler and Vortexa, Saudi Arabia’s observable crude oil exports have plummeted by about one-third to an average of 3.03 million barrels per day.

This situation reflects the consequences of the six-month-long diplomatic standoff between Washington and Tehran, which has so far failed to be resolved. OPEC production, which had partially recovered via the Persian Gulf in June and July, has now fallen again, indicating that the conflict continues to disrupt actual supply.

Slight increases in production in Iraq and Venezuela could not mask the overall downward trend.

In contrast to Saudi Arabia, Iraq's daily production increased by 270,000 barrels to 2.98 million barrels in August, while Venezuela's production rose by 70,000 barrels to 1.23 million barrels per day, a seven-year high. The latter's increase is related to the United States' increased control over the country's oil industry.

However, the increases from the two countries were far from enough to offset the sharp decline in Saudi Arabia's production, and OPEC's overall production still recorded a significant reduction.

Late last month, Trump announced that the United States would gain majority control of Venezuela's vast oil wealth. According to sources, Caracas is seriously evaluating the possibility of withdrawing from OPEC, just months after the UAE announced its withdrawal from the organization.

These developments are putting pressure on OPEC's overall cohesion. Venezuela's move towards Washington creates tension with OPEC's traditional collective decision-making framework, and the alliance's internal cohesion is being tested.

OPEC+ maintains its October production target; capacity audit becomes the next focus.

Last weekend, the OPEC+ group of major member countries agreed to maintain the October production target unchanged, continuing the trend following a series of symbolic production increases.

This series of production increases has nominally reversed the production cuts implemented in 2023, but the blockade of the Strait of Hormuz has hampered the actual increase in output.

The next key task for the alliance is to audit the actual production capacity of each member country, the results of which will be used to determine the production caps for each member in 2027. This audit must be completed by the end of this month and then submitted to the oil ministers of each country for consideration at their meeting in late November.

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