OPEC Monthly Report: Lowers 2026 Global Oil Demand Forecast; Saudi Arabia Restores Over 1 Million Barrels/Day in July

Saudi Arabia's crude oil production rebounded significantly in July. However, due to the reignition of geopolitical conflicts and blocked export routes, the increased production was not fully converted into supply for the international market, with part of the increment instead going into domestic inventories.

The latest monthly report from OPEC shows that Saudi Arabia's crude oil daily production rose to 8.2 million barrels in July, an increase of approximately 1.1 million barrels from June's 7.1 million barrels. Meanwhile, OPEC lowered its global oil demand growth forecast for 2026 and raised its prediction for 2027, suggesting that the demand recovery may be further delayed compared to previous expectations.

For the oil market, the coexistence of production recovery and export restrictions means that actual improvements on the supply side are still constrained by transportation bottlenecks. Short-term oil price trends will continue to depend heavily on the geopolitical situation in the Middle East and shipping security in the Gulf.

Saudi Arabia Restores Over 1 Million Barrels/Day

The OPEC monthly report indicates that the seven member countries that report production data directly to the organization increased their combined output by 1.88 million barrels/day in July, with the increase mainly coming from Saudi Arabia and Iraq.

Among them, Saudi Arabia's daily production rose to 8.2 million barrels, a month-on-month increase of about 1.1 million barrels. The overall average daily production of OPEC+ in July was 37.66 million barrels, an increase of approximately 1.42 million barrels/day compared to June, with production restoration in Gulf oil-producing countries being the main source of the increase. However, Saudi Arabia's production level still shows a significant gap from pre-war levels, indicating that production has not yet fully recovered.

Notably, the production rebound did not translate synchronously into exports. Data shows that Saudi Arabia's actual external supply in July was about 780,000 barrels/day lower than its reported production, meaning that part of the new crude oil was retained for domestic storage. The International Energy Agency recently estimated that, as of early August, Saudi Arabia's domestic crude oil inventories had risen to at least their highest level since 2016.

This change is closely related to regional developments. Following the breakdown of the ceasefire, tensions between the US and Iran escalated again, putting pressure on shipping security in the Strait of Hormuz in the Persian Gulf and the Bab el-Mandeb Strait in the Red Sea. Export obstructions mean that even if oil-producing countries resume production, it is difficult to transport the entire increment to the international market in a timely manner. Consequently, the new supply is reflected more as inventory accumulation rather than an increase in spot market supply.

OPEC Lowers 2026 Demand Forecast

On the demand side, OPEC lowered its global oil demand growth forecast for 2026 from 780,000 barrels/day to 580,000 barrels/day, a decrease of about 26%, reflecting the drag on recent oil consumption caused by geopolitical conflicts and the macroeconomic environment.

At the same time, OPEC raised its demand growth forecast for 2027 from 1.94 million barrels/day to 2.16 million barrels/day, implying that the organization remains confident in the medium-to-long-term recovery of demand but believes that some growth momentum may be deferred from 2026 to 2027.

The adjustment of "lower near-term, higher long-term" further highlights the core contradiction in the current oil market: while the supply side is recovering, export restrictions and slowing demand may weaken the contribution of increased production to actual market supply. For OPEC+, subsequent production policies will continue to seek a balance between restoring supply and maintaining market stability.