In a move to stabilise global oil markets, Saudi Arabia has announced that it will extend its voluntary crude oil output cut of 1 million barrels per day into September. This marks the third consecutive month of such declines, according to the state-owned Saudi Press Agency (SPA).
The decision comes as a response to the ongoing challenges faced by the oil market. The SPA reported that the Kingdom’s production for September 2023 will be around 9 million barrels per day, as the voluntary cut continues for another month.
The 1 million barrel per day cut was initially implemented in July and August and has the potential to be extended further or even deepened, depending on market conditions, as indicated by the SPA. Additionally, some members of the Organization of the Petroleum Exporting Countries (OPEC) are voluntarily reducing production by a total of 1.66 million barrels per day until the end of 2024.
These voluntary cuts are separate from the production policy agreed upon by OPEC and its allies, collectively known as OPEC+. The Joint Ministerial Monitoring Committee, one of OPEC’s technical committees, will meet virtually on Friday to review market fundamentals. While this committee cannot independently decide on policy changes, it may call for an extraordinary meeting of OPEC ministers to address further actions.
Following the announcement of Saudi Arabia’s extended production cut, oil prices saw little change. Brent futures for October expiry were trading at $83.65 per barrel at 2:30 p.m. London time (9:30 a.m. ET), a 45-cent increase from the Wednesday settlement. Meanwhile, the WTI contract for September delivery was priced at $79.97 per barrel, up 48 cents from the previous close.
Oil prices have faced pressures in the first half of the year due to various factors, including macroeconomic concerns, inflationary pressures, turbulence in the banking sector, and a gradual recovery in Chinese demand. However, both OPEC and the Paris-based International Energy Agency predict a surge in demand in the second half of 2023, which could potentially lead to supply tightness.
Saudi Arabia’s decision to extend the production cut reflects its commitment to stabilising the oil market and ensuring a balanced supply-demand equation. As the world closely monitors oil market dynamics, the actions of major oil producers like Saudi Arabia will continue to play a crucial role in shaping global energy trends.