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Major exporters announced cuts due to considerations about the effects of a weaker call on prices.
Stanley Reed
Saudi Arabia said on Monday it would increase the million-barrel-per-day oil production cut it announced in June until at least August, to boost what officials see as stubbornly low oil prices. The Saudis were joined by Russia, whose Deputy Prime Minister Alexander Novak said Moscow would reduce materials by 500,000 barrels in August.
Together, those ingredients may account for just 1. 5% of global supplies. Oil costs, first of all, skyrocketed with the announcement of the cuts, but then disappeared.
Oil costs have been under pressure in recent months due to uncertainty about the strength of the global economy, with many central banks proceeding to raise interest rates to curb inflation. There are also doubts about the long-term of oil, as electric cars and other opportunities for oil intake continue to develop. The Saudis and other members of the manufacturers’ organization known as OPEC Plus have been cutting output since last fall.
“This additional voluntary cut reinforces the precautionary efforts” deployed in the past, according to the Saudi Press Agency. The most recent circular of Saudi production cuts began earlier this month. to make sure the oil market stays balanced,” Novak said in a statement.
Monday’s announcements appear to have been coordinated and were intended to give the impression that Russia, co-chair of OPEC Plus, remains committed to the group’s efforts to manage the market.
“The goal here is to show that it’s not just Saudi Arabia that operates alone,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.
It is unclear to what extent Russia will reduce supply. Russia has come under pressure from the Saudis and other OPEC Plus members to settle for production curbs, but Moscow has been reluctant to sacrifice revenue that can be used to help fund the war in Ukraine. China and India now buy most of Russia’s oil exports through the sea after foreign sanctions targeting Russia’s energy industry limited sales to previous buyers in Europe and elsewhere.
Saudi Oil Minister Prince Abdulaziz bin Salman appears to be trying to prove to markets that he will do whatever is mandatory for prices. For a long time, OPEC Plus will be able to maintain cohesion.
According to Saudi Arabia’s announcement, the kingdom’s oil production will be just nine million barrels a day, a drop of just two million barrels compared to the third quarter of last year. The Saudis are investing heavily to increase their production. Capacity, however, are forced to slow down.
Stanley Reed has been writing from London for The Times since 2012 about energy, the environment and the Middle East. Prior to that, he was head of the London bureau for BusinessWeek magazine. More information about Stanley Reed
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