Saudi Arabia, which leads the “OPEC +” alliance, said that the first cut in oil supplies from the alliance in more than a year shows that the alliance is serious regarding managing global crude markets and is ready to take proactive measures.
And he said Saudi Energy Minister Prince Abdulaziz bin Salman In an interview with “Bloomberg” on Monday, following the “OPEC +” alliance agreed to cut production targets by 100,000 barrels per day in October, “This decision is an expression of the will that we will use all the tools in our alliance.”
He added, “The simple adjustment shows that we will be attentive, proactive and active in supporting the stability and effective functioning of the market for the benefit of market participants and the industry,” according to what Al Arabiya.net has seen.
The reduction came as a surprise to many traders who expected that the Organization of Petroleum Exporting Countries “OPEC” and its partners would keep production stable with oil prices rising above $90 a barrel.
The market also looks set to get tougher in the coming months, as the European Union imposes sanctions on Russian exports.
However, OPEC+ is also facing a market where concerns regarding the strength of demand are beginning to outweigh supply concerns. Crude oil futures have lost regarding 20% in the past three months due to the threat of a global economic slowdown.
China, the largest oil importer, showed signs of a “worrying” economic slowdown, as consumption evidently fell 9.7 percent in July to a two-year low amid weak business activity and severe “Covid-19” restrictions.
Meanwhile, the United States avoided recession and pursued tighter monetary policy.
For his part, the head of oil and gas research at Envirus, Bill Farren Price, said that the production cut “aims to send a signal that (OPEC +) is back in price control mode,” adding: “The alliance may believe that this step will be sufficient to deter any sellers.” out in the open.”
Analysts expected the alliance to keep production stable in October, following increasing it by 100,000 barrels per day this month in response to pleas from US President Joe Biden.
And the White House said in a statement following the “OPEC +” decision: “Biden was clear that energy supplies must meet demand to support economic growth and reduce prices for American consumers and consumers around the world.”
He added that the president was “determined to continue to take every necessary step to support energy supplies and lower energy prices,” referring to the US release of emergency oil stocks.
And the Saudi Energy Minister, Prince Abdulaziz bin Salman, had already given two weeks ago an indication of a next political move, and said that the lack of liquidity means that futures prices have become very volatile, and detached from the realities of supply and physical demand.
He added that the best way to restore balance might be to cut production, a proposal that won broad support from the rest of the alliance.
The “OPEC +” alliance also faces the possibility of increasing supplies from Iran, which is still stuck in negotiations to revive the nuclear agreement and remove US sanctions on its oil sales, as a successful agreement might add more than one million barrels per day to global markets, according to the International Energy Agency, but There is still some work to be done before this happens.
