Saudi Arabia has urged its fellow OPEC members and their partners outside the cartel to cut deeper into their oil production to speed up the rebalancing of oil markets, Reuters reports, citing the Saudi Press Agency.
“The Kingdom of Saudi Arabia’s initiatives aim at urging the countries participating in the OPEC+ agreement and other producing countries to adhere to the cut rates and to provide more reduction in production in order to contribute to restoring the desired balance of the global oil markets,” a government statement read.
The Kingdom earlier announced it would deepen its own cut quota by as much as 1 million bpd to 7.5 million bpd to prop up depressingly low prices that have already cost Aramco 25 percent of its first-quarter profits, in combination with the effects of the coronavirus pandemic.
With plunging oil revenues, the Saudi government has had to resort to some unpopular measures such as a threefold increase in value-added tax, a suspension of the cost of living allowance it introduced in 2018 and reducing public spending by more than $26 billion.
The price of a barrel of Brent crude fell by 65.6 percent over the first quarter, under the combined pressure of rising production, notably from Saudi Arabia as well as its OPEC+ frenemy Russia, and the coronavirus pandemic, which took a solid bite out of global oil demand. As a result, Saudi Arabia found itself with millions of barrels of temporarily unsellable oil.
In April, OPEC+ agreed to reduce their combined output of crude by 9.7 million bpd, beginning this month. However, the size of the cut turned out to be too low for oil markets, and the news did not have a lasting effect on prices, while the downward trend intensified as the pandemic crushed oil demand globally.
By Irina Slav for Oilprice.com
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