Saudi Arabia said on Monday it would cut oil output by one million barrels per day, which it announced in June, until at least August, while trying to increase what officials see as extremely weak oil prices. Are. The Saudis were joined by Russia, whose deputy prime minister Alexander Novak said Moscow would cut supplies by 500,000 barrels in August.
In total, these trims could account for 1.5 percent of global supply. Oil prices rose marginally on news of the cut, with Brent crude, the global benchmark, rising above $76 a barrel before falling slightly lower.
Oil prices have been under pressure in recent months due to uncertainty about the strength of the global economy as several central banks raise interest rates to curb inflation. There are also doubts about the long-term future of oil as electric vehicles and other alternatives to oil consumption continue to grow. The Saudis and other members of the producer group known as OPEC Plus have been gradually reducing production since last fall.
According to the state-run, “this additional voluntary reduction has been done to reinforce precautionary efforts”. Saudi Press Agency, The latest round of Saudi production cuts began earlier this month. The proposed cut in Russia’s exports in August would be “as part of an effort to ensure the oil market remains balanced,” Mr Novak said in a statement,
Monday’s announcements appeared coordinated and were aimed at creating the impression that Russia, which co-chairs OPEC Plus, is committed to the group’s efforts to manage the market. “The intent here is to signal that it is not just Saudi Arabia acting alone,” said Richard Bronze, head of geopolitics at research firm Energy Aspects.
It is unclear how much supply Russia will actually cut. Russia has been under pressure from the Saudis and other OPEC Plus members to go along with production curbs, but Moscow has been reluctant to sacrifice revenue that could be used to help finance the war in Ukraine. China and India are now buying the bulk of Russia’s marine oil exports as international sanctions targeting Russia’s energy industry have restricted sales to previous buyers in Europe and elsewhere.
Saudi Oil Minister, Prince Abdulaziz bin Salman, is trying to show markets that he will do whatever is necessary to support prices. But the Saudis are in a difficult position to bear the brunt of the cuts, leading to speculation about how long OPEC+ will be able to hold together.
According to Saudi Arabia’s announcement, the kingdom’s oil production will now amount to only 9 million barrels per day – a drop of almost 2 million barrels per day compared to the third quarter of last year. The Saudis are investing heavily to increase their production capabilities but instead they are being forced to back down.