Saudi Arabia To Cut Oil Supply By 1m Barrels

The Saudi Arabian government has finalised plans to reduce its global export by taking a unilateral step to prop up the sagging price of crude.

This decision is coming after two previous cuts to the supply by major producing countries in the Organization of the Petroleum Exporting Countries (OPEC+) plus alliance failed to push oil higher.

New Telegraph gathered that the Saudi government will cut 1 million barrels per day, and it commences from July 2023 as the other OPEC+ producers agreed in a meeting held in Vienna to extend earlier production cuts through next year.

Saudi Energy Minister, Abdulaziz bin Salman who made this known while speaking at a news conference said, “We wanted to ice the cake.”

He said the cut could be extended and that the group “will do whatever is necessary to bring stability to this market.”

The move would likely push up oil prices in the short term, but the impact after that would depend on whether Saudi Arabia decides to extend it, said Jorge Leon, senior vice president of oil markets research at Rystad Energy.

The move provides “a price floor because the Saudis can play with the voluntary cut as much as they like,” he said.

The slump in oil prices has helped U.S. drivers fill their tanks more cheaply and given consumers worldwide some relief from inflation.

“Gas is not going to become cheaper,” Leon said. “If anything, it will become marginally more expensive.”

There are concerns about economic weakness in the U.S. and Europe, while China’s rebound from COVID-19 restrictions has been less robust than many had hoped.

Saudi Arabia, the dominant producer in the OPEC oil cartel, was one of several members that agreed on a surprise cut of 1.6 million barrels per day in April. The kingdom’s share was 500,000.

That followed OPEC+ announcing in October that it would slash 2 million barrels per day, angering U.S. President Joe Biden by threatening higher gasoline prices a month before the midterm elections.

All told, OPEC+ has now dropped production on paper by 4.6 million barrels a day. But some countries can’t produce their quotas, so the actual reduction is around 3.5 million barrels per day or over 3% of the global supply.

The previous cuts gave a little lasting boost to oil prices. International benchmark Brent crude climbed as high as $87 per barrel but has given up its post-cut gains and has been loitering below $75 per barrel in recent days. U.S. crude has recently dipped below $70.