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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Prices Climb As Saudi Arabia Goes It Alone With Additional Cut

  • Sunday’s much-anticipated OPEC+ meeting resulted in a unilateral production cut from Saudi Arabia of 1 million barrels per day next month.
  • Both WTI and Brent initially surged on the news but by Monday morning were only trading slightly higher at $72.82 and $77.21 respectively.
  • The UAE was allowed to increase its output by 200,000 bpd while some countries that had failed to reach their quotas had their quotas adjusted.
oil

Crude oil prices rose by more than 1% in early trade today following the OPEC+ meeting that took place Sunday.

At that meeting, Saudi Arabia said it would voluntarily cut its oil production by another 1 million barrels daily next month in a bid to prop up global oil prices.

Oil prices did initially spike on Sunday, with WTI nearing $74 and Brent climbing toward $78 before both falling back.

One other member of the cartel, the UAE, was allowed to actually increase its output but about 200,000 bpd, while several others got their production quotas adjusted. These were countries that consistently failed to reach their assigned quotas for various reasons, such as Nigeria and Angola.

At the same time, the meeting unsurprisingly agreed to extend current production cuts of 3.66 million bpd until the end of this year and reduce combined production by another 1.4 million bpd from the start of 2024.

"It is a clear signal to the market that OPEC+ is willing to put and defend a price floor," Energy Aspects’ Amrita Sen told Reuters.

“We want to just ice the cake with what we have done,” the Saudi energy minister said, as quoted by the Financial Times. “We will do whatever is necessary to bring stability to this market.”

He called Saudi Arabia’s additional cut “a Saudi lollipop” for the rest of OPEC+, since thanks to that cut the other members would not have to make deeper cuts to their production.

This cut will bring Saudi output to some 9 million barrels daily, as it comes on top of another voluntary cut of half a million barrels daily, implemented earlier this year.

“It is very low in the context that we are not in a global recession,” UBS commodity analyst Giovanni Staunovo told the FT. “It is a clear signal that they want to achieve, as they say, ‘market stability’.”

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By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on June 05 2023 said:
    OPEC+ took the right and expected decision yesterday to extend the previous cuts they made in April this year until the end of 2023 and reduce combined production by another 1.4 million barrels a day (mbd) from the start of 2024.

    However, Saudi Arabia’s voluntary decision to reduce its oil production by another 1 mbd next month in a bid to prop up prices is meaningless if not waste of time.

    The reason is that the decline in oil prices over the last two months has nothing to do with the fundamentals of the market which remain robust and everything to do with persistent fears of a banking or financial crisis triggered by a shaky US banking system.

    Pressure on prices will continue until these fears subside or disappear altogether. When and if this happens, prices will recover all their previous losses and resume their surge.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Colin on June 05 2023 said:
    not so much trying to prop up the price perhaps, but an opportune moment to hide KSA misinformation about its reserves and output capacity

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