2023-07-03 15:36:42
Saudi Arabia announced on Monday that it was extending its oil production cut by a million barrels a day to boost prices at half mast, with Russia announcing in the wake of cutting its exports by 500,000 bpd in August.
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These measures are the latest taken by major producers to stabilize prices in the face of high market volatility, the lingering fallout from the Russian invasion of Ukraine and the faltering economic recovery in China.
Saudi Arabia, a heavyweight in the Organization of the Petroleum Exporting Countries (OPEC), decided in early June to cut production once more in the hope of raising prices.
This voluntary reduction, which came into effect this weekend, will continue in August and “may be extended” beyond this period, the kingdom’s official news agency said, citing an Energy Ministry source. .
“The source confirmed that this additional voluntary reduction reinforces the precautionary measures taken by the OPEC+ countries with the aim of supporting the stability and balance of the oil markets”, added the agency.
This decision maintains the production of the rich oil kingdom at around nine million barrels a day.
Announcing the cut last month following the meeting of oil producers, Saudi Energy Minister Prince Abdulaziz bin Salman said it was potentially “extendable”.
In April, several OPEC+ members decided to voluntarily cut production by more than a million barrels a day, a surprise move that briefly supported prices but did not lead to a sustained rise.
” Balance “
Shortly following Saudi Arabia’s announcement on Monday, Russia said it would cut crude exports by 500,000 barrels per day in August.
“As part of efforts to balance the market, Russia will voluntarily decrease deliveries to oil markets by 500,000 barrels per day in August by reducing exports by this amount,” Deputy Prime Minister Alexander Novak said. , quoted by Russian news agencies.
Russia had already announced in February 2023 a drop in its crude production of 500,000 barrels per day, a measure which it said it wanted to maintain until the end of 2024. The decision announced on Monday concerns exports, not production.
Since the start of the conflict in Ukraine, Moscow has redirected its energy exports from Europe to India and China.
The market’s reaction to the announcements made on Monday by Riyadh and Moscow, allies within OPEC+, a collective bringing together the main oil exporting countries and their partners, was relatively discreet.
Brent, Europe’s crude benchmark, rose 0.98% to $76.15 a barrel, and its US equivalent, WTI, rose 1.02% to $71.36 a barrel, far from the peaks recorded in March 2022 at the start of the conflict in Ukraine (nearly $140).
Several analysts, however, doubted that Monday’s announcements would produce lasting effects on prices.
“It’s the usual automatic reaction to announcements of production cuts,” said Chris Beauchamp, analyst at IG. “But given that this is not a coordinated decision by all OPEC+ members, it is difficult to imagine that this is a real upward movement”.
For Jamie Ingram, analyst at MEES, “Russia should not convince that it will fully respect its last commitments, but the most important thing is that it is a public commitment to support the Saudi strategy of management of the markets ” .
Since the start of the year, Brent has fallen by 11% and WTI by 7%.
Saudi Arabia, the world’s largest oil exporter, is counting on higher oil prices to fund an ambitious reform program that might move its economy away from fossil fuels.
Analysts say the kingdom needs an oil price of $80 a barrel to balance its budget, well above the averages recorded in recent years.
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