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Oil cuts drag down Saudi industrial activity

Saudi oil cuts industrial activity production Reuters/Maxim Shemetov
Saudi Arabia has extended a one million barrels per day voluntary crude oil output cut into September
  • Production fell 1.6% in June
  • 1m barrels per day cut to September
  • Kingdom’s exports down $11bn

Saudi Arabia’s industrial production fell 1.6 percent in June, as oil production cuts lowered reported mining and quarrying productivity.

The decline was reported in new data from the General Authority for Statistics (GSTAT) published on August 10. 

Manufacturing activity increased by 10.1 percent compared to the same month of the previous year. Electricity and gas supplies rose by 25 percent. The index was up overall from May by 0.5 percent. 

GSTAT counts oil production as part of mining and quarrying activity, so the recent policy of cuts resulted in this falling by 6.5 percent.

The kingdom is trying to drive up manufacturing as part of its economic diversification plans. The Ministry of Industry and Mineral Resources said in April that 495 billion Saudi riyals ($132 billion) had been invested in the sector since 2016 when Vision 2030 was launched.

Saudi Arabia announced this month it will extend a one million barrels per day voluntary crude oil output cut into September. It blamed concerns about a global economic slowdown and a slump in demand. 

Riyadh’s decision to scale back oil production cut the kingdom’s total exports in the last year by $11 billion, GSTAT said last month.

Overall merchandise exports from Saudi Arabia amounted to SAR 97.1 billion ($25.89 billion) in May 2023, down 32.1 percent year on year.

Most of this was a result of oil exports amounting to SAR 72 billion, down SAR 43.5 billion, or 37.7 percent, compared with May last year.

Oil made up 74.1 percent of total Saudi exports in May 2023, down from 80.8 percent in May 2022. 

Non-oil exports – including re-exports, which rose 50 percent – decreased by 8.7 percent to SAR 25.1 billion in the last year, the figures showed.