Saudi oil output crashes to 35-year low

Saudi Arabia’s crude oil production has fallen to its lowest level since 1990 as escalating conflict across the Middle East disrupts the kingdom’s major export corridors, according to Bloomberg.

Riyadh informed OPEC that crude production dropped by approximately 1.9 million barrels per day (bpd) in August, bringing total output down to 6.238 million bpd, Bloomberg reported, citing OPEC’s latest monthly figures.

The decline represents Saudi Arabia’s lowest production level in more than 35 years and comes amid mounting disruption to regional energy markets following the outbreak of the US-Israel conflict with Iran earlier this year.

Saudi Arabia is facing pressure on both of its principal maritime oil-export routes.

Shipping through the Strait of Hormuz has been severely restricted by the continuing confrontation involving Iran and the United States, increasing Saudi reliance on export routes through the Red Sea.

At the same time, Iran-aligned Houthi forces in Yemen have renewed their campaign against Saudi-backed forces and announced a maritime blockade targeting the kingdom.

Saudi energy infrastructure has also come under direct attack. Saudi authorities said a combined missile and drone assault on Tuesday caused fires at oil facilities and forced some operations to halt, although Riyadh has released limited information about the scale of the damage or its effect on production.

Pressure on the Red Sea route intensified further on Thursday after the Houthis reportedly captured the strategically important Yemeni port city of Mocha.

The city lies near the Bab al-Mandeb Strait, the narrow passage connecting the Red Sea with the Gulf of Aden and one of the world’s most important maritime trade routes.

The Houthis have said commercial navigation through the area remains safe for vessels other than Saudi shipping.

The disruption is increasingly evident in tanker movements. Preliminary shipping data compiled by Bloomberg indicates Saudi crude exports declined by roughly one-third during August.

Saudi Arabia told OPEC that its overall “supply to market,” which includes oil released from storage, amounted to 7.122 million bpd. The difference suggests Riyadh has been drawing on inventories to offset some of the reduction in current production.

OPEC’s estimates based on independent secondary sources were higher, placing Saudi production at approximately 7.276 million bpd during August.

Growing uncertainty over both the Strait of Hormuz and Bab al-Mandeb has meanwhile driven international oil prices sharply higher.

Brent crude climbed 6.3% on Thursday to settle at $107.63 per barrel, while West Texas Intermediate rose to $102.48. Both benchmarks reached their highest levels since May.

The regional upheaval is also beginning to reshape international energy supply routes.

Russia this week dispatched the first shipment from its enormous Vostok Oil development in the Arctic, opening an export corridor through the Northern Sea Route. Rosneft has said the project could ultimately produce volumes equivalent to around 730 million barrels annually.

The United States has also moved to strengthen its access to Venezuelan oil supplies through a major investment arrangement involving more than 65 billion barrels of the country’s proven reserves. President Donald Trump has said the additional supply could assist in replenishing the US Strategic Petroleum Reserve.

While new sources of supply could eventually relieve pressure on international markets, the immediate consequences of the Middle East conflict are already being felt by consumers.

The average US diesel price exceeded $6 per gallon for the first time on record on Thursday, according to GasBuddy, representing an increase of nearly 60% since the US and Israel began military operations against Iran in late February.

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