RIYADH: Saudi Arabia and Russia said on Tuesday they would extend voluntary oil cuts until the end of the year, sending the price of Brent crude to a 10-month high.
The Saudi production cut of one million barrels per day which first took effect in July will continue “for another three months until the end of December 2023”, the kingdom’s energy ministry said in a statement.
Russia’s export cut of 300,000bpd will continue for the same period, Deputy Prime Minister Alexander Novak said in a separate statement.
Brent crude rose above $90 per barrel on the news for the first time since November, while West Texas Intermediate, the main US futures contract, jumped 1.9pc to $87.16.
Riyadh, the world’s biggest crude exporter, first announced its cut after a June meeting of the 23-nation Opec+ alliance, which also includes Russia.
A statement in early August revealing the cut would last through September included a warning that it could be “deepened”, but Tuesday’s announcement has kept it at the same level for now.
That decision “will be reviewed monthly to consider deepening the cut or increasing production”, the energy ministry statement said.
The unilateral Saudi cut followed a decision in April by several OPEC+ members to slash production voluntarily by more than one million bpd -- a surprise move that briefly buttressed prices but failed to bring about lasting recovery.
Last October, Opec+ agreed to reduce output by two million barrels per day.
That decision riled the United States, which at the time accused Saudi Arabia, a security partner, of siding with Russia in the war in Ukraine.
Oil prices increased in July, the first month the Saudi-only cut took effect, clearing the $80 per barrel threshold analysts often say Riyadh needs to balance its budget, though the various production cuts could push that threshold higher.
Brent crude traded at $88 per barrel at the end of August, Riyadh-based firm Jadwa Investment said in a report distributed Sunday, noting that “although persistently poor economic data from China has continued to weigh on sentiment, there is little doubt that fundamentals are tightening.” Justin Alexander, director of the consultancy Khalij Economics, said: “The additional cuts do appear to have boosted prices and the supply is looking tight in Q4 despite rising output from Iran and some other countries.
Published in Dawn, September 6th, 2023
