2023-07-04 06:47:39
Saudi Arabia’s decision to extend oil production cuts is not surprising, but massive, 1 million barrels per day during August. Add to that Russia’s announcement to cut production by half of this number for the same month, which removes approximately 1.5% of the global demand for oil outside the market for the month of August.
The kingdom has already cut a huge portion of its oil production in a bid to prop up prices amid fears of a global economic slowdown. So far, its efforts have not been truly rewarded, as Brent crude is still trading at less than $81 a barrel, the price at which Saudi Arabia can balance its budget, according to the International Monetary Fund.
Russia’s announcement comes after the OPEC+ member agreed to cut 500,000 bpd in March. Given that it produced more oil that month and the following month in April than it said, the market may take a closer look at whether Russia sticks to its new target.
For Russia, the various embargoes, restrictions and price caps of the G7 have already limited how much it can earn from its oil, which is currently trading at $20 a barrel less than Brent. So there may be less incentive for it to cut production, but doing so could ease tensions between Russia and Saudi Arabia and preserve unity in OPEC+.
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