Oil Rallies as Saudi Arabia Extends Output Cuts
The crude oil prices surged as Saudi Arabia’s plan to extend output cuts. Oil prices increased as the market envisaged tight market supply because of Saudi Arabia and Russia’s output reduction while lingering fears of a global economic downturn continued to weigh on prices.
According to market data, the international benchmark Brent crude traded at $75.25 per barrel, translating to a 0.80% gain from the closing price of $74.65 a barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $70.41 per barrel, up 0.88% from the previous session’s close of $69.79 per barrel. Oil prices have come under intense pressure in recent times due to weak economic data.
The market has seen a slowdown in demand from top crude oil consumers: The United States, China, and India over depressed macroeconomic indicators with Europen Union continuing to slam economic related sanctions on Russia.
Early this week, Saudi Arabia, Russia, and Algeria announced their intention to tighten their oil supply curbs, causing a surge in oil prices amid concerns about muted global economic activity.
Specifically, Saudi Arabia said it would extend its voluntary cut of 1 million barrels per day (bpd) in July for another month into August, with the possibility of a later extension.
With the recent cut, Saudi Arabia’s production for the month of August will be approximately 9 million barrels per day. Meanwhile, Russia said it would voluntarily reduce its oil supply by 500,000 barrels per day in August by cutting its exports to global markets by that amount ‘as part of the effort to ensure the oil market remains balanced.’
This was in addition to the country’s cuts of 700,000 bpd from its February production level. Algeria also said it would cut its output by an extra 20,000 barrels a day in August. This output cut will be in addition to the 48,000 barrels a day cut announced in April.
On June 4, the OPEC+ group agreed during the 35th ministerial meeting to keep the current output cuts until the end of the year, with additional voluntary production cuts from OPEC’s swing producer, Saudi Arabia, of around 1 million bpd in July.
Saudi Arabia’s Energy Minister Abdulaziz bin Salman had said the output cuts might be extended from July onward. Meanwhile, Russia’s state-run news agency TASS disclosed Russia’s decision to cut oil exports by 500,000 bpd in August voluntarily.
‘As part of efforts to ensure the oil market remains balanced, Russia will voluntarily reduce its oil supply in the month of August by 500,000 bpd by cutting its exports by that quantity to global markets,’ Russian Deputy Prime Minister Alexander Novak told reporters on Monday.
According to TASS, the new decision affects exports rather than production. # Oil Rallies as Saudi Arabia Extends Output Cuts
