The Organization of the Petroleum Exporting Countries (OPEC) has released its monthly oil market report for August. Despite the price of oil being low, there are several key surprises in this report. One such surprise is that Saudi Arabia actually had record output.

OPEC said that its oil reference basket averaged $42.68 per barrel in July. This was actually the first decline in five months. Issues to consider were weaker demand, high refined product stocks and rising crude supplies — all making for a $3.16 basket drop. OPEC also noted that speculators cut their long positions further in all markets.

As the price of oil is down sharply from late 2014, you would just assume that OPEC is up against a wall and that oil production has tanked. It turns out that the expensive and uneconomic oil projects are the ones that are off line. OPEC said that the official OPEC July crude oil production was up 46,000 barrels per day, up to 33.11 million barrels per day.

Saudi Arabia is generally considered to be the king of OPEC. Saudi Arabian oil output hit record highs in July, rising 30,100 barrels per day to 10.67 million. The prior peak was 10.56 million from June 2015.

Now OPEC is projecting that the non-OPEC supply will drop by about 790,000 barrels per day in 2016, and that is a revision lower by 90,000 barrels.

OPEC did increase global oil demand growth to 1.22 million barrels per day in 2016. Perhaps the good news here, if you trust OPEC forecasting at least, is that OPEC is keeping its global oil demand growth estimate static at 1.15 million barrels per day for 2017. Those figures are of course the growth numbers rather than total demand numbers.

OPEC further noted that the OECD commercial oil stockpile was down marginally to 3.045 billion barrels.

OPEC sees that the non-OPEC nations will have lower output in 2017, with supply falling by about 150,000 barrels per day.

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OPEC also opined about refining margins, noting the weakness:

Despite the fall seen in crude prices, refining margins have been weakening during the last month due to high product inventories, which were caused by the lower-than-expected increase in demand. There are lingering concerns that the US and European refiners could cut runs in response to a declining gasoline crack in both regions in a period when summer driving and margins should have been at their highest during the year. This has been the major factor contributing to the downward pressure on crude prices in recent weeks.

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