Saudi Arabia said it would slash oil output by another one million barrels per day for at least a month starting in July as part of an effort by the OPEC+ group of leading producers to shore up crude prices.
“The Kingdom [of Saudi Arabia] will implement an additional voluntary cut in its production of crude oil, amounting to one million barrels per day, starting in July for a month that can be extended,” the state-owned Saudi Press Agency said Sunday.
The Saudi statement followed a meeting Sunday in Vienna of the alliance known as OPEC+, which includes members of the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other smaller producers.
At the meeting, Riyadh also agreed to extend a production cut of 500,000 barrels per day — announced in April — through 2024. Reuters, citing Russian Deputy Prime Minister Alexander Novak, reported that Moscow would extend its own production cut of 500,000 barrels per day through to the end of next year.
Other members of OPEC+ would also continue to curb output until the end of next year, Reuters reported.
“The source explained that the Kingdom’s additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” the Saudi Press Agency added.
OPEC+, which produces about 40% of the world’s crude oil, unexpectedly announced at the beginning of April that its members would cut output by 1.66 million barrels per day, on top of reductions of 2 million barrels per day unveiled in October.
Oil prices surged after the surprise April cut, reaching a peak later that month, but reversed course in subsequent weeks. On Friday, Brent crude, the global benchmark, rose above $76 a barrel, helped by bets that the Federal Reserve may hold off raising interest rates this month. However, it is still more than 11% down since the start of the year, and trading where it was before the April move by OPEC+.
Analysts had predicted that the group of producers would hold off announcing any further supply cuts Sunday, given a divergence of interests between Russia — whose oil exports are subject to a price cap imposed by the G7 over the war in Ukraine — and Saudi Arabia, which needs oil to rise above $80 a barrel to balance its budget.
But the kingdom’s energy minister had stoked speculation of a further cut when he said last month that he would keep short-sellers — traders betting that prices will fall — “ouching.”
“I don’t have to show my cards, I’m not a poker player… but I would just tell them: watch out,” Prince Abdulaziz bin Salman told a conference in Qatar organized by Bloomberg.
Oil prices have been under pressure from a gloomy overall outlook for the US and global economies. There is evidence that growth is stuttering in the United States and China — the world’s number one and two economies.
China’s slowdown gives Germany, Europe’s biggest economy, little hope of an easy exit from its own economic downturn since China is its most important trading partner.
The weekend meetings were marked by curbs on access for the media.
According to a Reuters report Wednesday, its text journalists that cover such meetings and are registered with OPEC as members of the press have not received an invite to cover the event. OPEC has also not offered accreditation to Bloomberg to cover the meeting, and two reporters from the Wall Street Journal who regularly cover OPEC have also not received invites.