OPEC Output Drops Sharply in Past Month Amid War-Related Disruptions

Global Oil Supply Takes a Devastating Hit as OPEC's Crude Production Plummets

In a stark reminder of the far-reaching consequences of conflict in the Middle East, OPEC's crude oil production plummeted by 7.56 million barrels a day in March, marking the largest single-month decline in at least four decades. According to a Bloomberg survey, the Organization of the Petroleum Exporting Countries' output collapsed by 25% to 22 million barrels a day, underscoring the crippling impact of the war on key members.

The March slump is the largest for a single month since 1989, surpassing even the 1973 Arab oil embargo, which saw a "gross loss" of 5 million barrels a day between October and December of that year. The supply losses have sent crude prices soaring, with Brent futures trading near $110 on Tuesday, while costs for products like jet fuel, diesel, and gasoline threaten pain for consumers.

The war between a US-Israeli alliance and OPEC member Iran has had a particularly devastating impact on Iraq, the OPEC member most reliant on the Strait of Hormuz. Iraqi production declined by 2.76 million barrels a day to 1.63 million a day, while Saudi Arabia and the UAE experienced significant losses, with Saudi production dropping by 2.07 million barrels a day to 8.36 million a day and the UAE's falling by 1.44 million a day to 2.16 million.

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Even with their ability to partially divert exports on alternative oil pipelines, Saudi Arabia and the UAE have seen a significant decline in their exports. Ship traffic through Hormuz is slowly recovering, but it remains at a trickle compared with prewar numbers.

Russia, a leading member of OPEC+, has also experienced disruption following a wave of Ukrainian drone attacks on oil export terminals on the Baltic Sea. The key Baltic port of Ust-Luga resumed crude loadings this week, having stopped at the end of March.

Before the war, eight key OPEC+ nations had been in the process of restoring oil production halted several years earlier. On April 5, they agreed to a symbolic supply increase for May in order to continue the process, but warned that it will take a long time to restart oil facilities damaged during the fighting.

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