Global Courant
Saudi Arabia’s plan to voluntarily cut production comes on top of OPEC+’s deal to limit supply next year to support prices.
Oil prices have risen more than $1 a barrel after Saudi Arabia, the largest crude oil exporter, pledged to cut production by another million barrels per day (bpd) from July to address macroeconomic headwinds hitting markets. pressured to counteract.
Brent oil futures LCOc1 rose $1.72, or 2.3 percent, at 09:00 GMT Monday to $77.85 a barrel, after hitting a session high of $78.73.
US West Texas Intermediate crude CLc1 climbed $1.72, or 2.4 percent, to $73.46 after hitting an intraday high of $75.06.
Both contracts posted gains of more than 2 percent on Friday after the Saudi energy ministry said the kingdom’s production would fall from about 10 million barrels a day in May to 9 million barrels a day in July. The cut is the largest in Saudi Arabia in years.
The voluntary cut comes on top of a broader agreement by the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to limit supply until 2024 as the OPEC+ producer group seeks to prop up declining oil prices.
Exit cut
OPEC+ pumps about 40 percent of the world’s crude oil and has lowered its output target by a total of 3.66 million barrels per day, representing 3.6 percent of global demand.
“Saudi remains sharper than most other members when it comes to securing oil prices above $80 a barrel, which is essential to balance its own fiscal budget for the year,” said Suvro Sarkar, leader of the energy sector team at DBS Bank.
“Saudi will likely continue to do whatever it takes to keep oil prices high…and take calculated preemptive measures to ensure macroeconomic concerns that may affect demand are ignored.”
Consulting firm Rystad Energy said the additional Saudi cut is likely to deepen the market shortfall to more than 3 million barrels per day in July, which could push prices higher in coming weeks.
Analysts from Goldman Sachs said the meeting was “moderately optimistic” for oil markets and could raise December 2023 Brent prices by $1 to $6 a barrel, depending on how long Saudi Arabia keeps production at bay over the next six months. maintains 9 million bpd.
“The immediate market impact of this Saudi downgrade is likely to be lower as destocking takes time, and the market may have already placed a meaningful probability on a downgrade,” the bank’s analysts added.
However, many of the OPEC+ cuts will have little effect as lower targets for Russia, Nigeria and Angola bring them in line with their actual production levels.
The United Arab Emirates, on the other hand, was allowed to increase production targets by 200,000 barrels per day to 3.22 million barrels per day to reflect their increased production capacity.
