Saudi Arabia will make deep production cuts in July as part of a broader output-limiting Opec+ deal as the group faces flagging oil prices and a looming supply glut.
Saudi Energy Minister Prince Abdulaziz said the cut of one million barrels per day (bpd) by Riyadh could be extended beyond July if needed. “This is a Saudi lollipop,” he said.
Opec+, which groups the Organisation of the Petroleum Exporting Countries and allies led by Russia, reached a deal on output policy after seven hours of talks and decided to reduce overall production targets from 2024 by a further total of 1.4m bpd.
However, many of these reductions will not be real as the group lowered the targets for Russia, Nigeria and Angola to bring them into line with their actual current production levels.
By contrast, the United Arab Emirates was allowed to raise output.
Opec+ pumps around 40 per cent of the world’s crude, meaning its policy decisions can have a major impact on oil prices.
Opec+ already has in place a cut of 2m bpd agreed last year and amounting to 2pc of global demand.
In April, it also agreed to a surprise voluntary cut of 1.6m bpd that took effect in May until the end of 2023.
Saudi Arabia said on Sunday it would extend its portion of voluntary cuts of 0.5m bpd into 2024. It was not clear if the July reduction of 1m was on top of 0.5m bpd or if the latter would be included in the July reduction.
The April announcement helped to drive oil prices about $9 per barrel higher to above $87, but they swiftly retreated under pressure from concerns about global economic growth and demand. On Friday, the international benchmark Brent settled at $76.
Western nations have accused Opec of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused Opec of siding with Russia despite Western sanctions over Moscow’s invasion of Ukraine.
In response, Opec insiders have said the West’s money-printing over the last decade has driven inflation and forced oil-producing nations to act to maintain the value of their main export.
Asian countries, such as China and India, have bought the greatest share of Russian oil exports and refused to join Western sanctions on Russia.
BDST: 1309 HRS, JUN 05, 2023