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Oil Prices Climb As Saudi Arabia Extends Production Cut Into August

Saudi Arabia is extending its unilateral 1 million bpd production cut into August, the world’s top crude exporter said on Monday, sending oil prices rising by 1%.  

“An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of August that can be extended, and in effect, the Kingdom’s production for the month of August 2023 will be approximately 9 million barrels per day,” the official Saudi Press Agency (SPA) reported on Monday.

The extension was not a total surprise for the market.

Back in early June, the OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd. The cut could be extended beyond July, Saudi Energy Minister Prince Abdulaziz bin Salman said a month ago.

The extension is now a fact, Saudi Arabia says.

“This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil market,” the Saudis said today.

Saudi Arabia has been looking to prop up oil prices for months after concerns about the global economy sent benchmark prices below $80 per barrel. That’s the level the International Monetary Fund (IMF) has estimated as the breakeven price for Saudi Arabia to balance its budget this year.

Despite Saudi efforts so far, Brent oil prices have been trading below the $80 a barrel mark since the end of April. 

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Early on Monday, after the Saudi announcement of an extension of the cuts for another month, Brent was up by 0.89% at $76.06, while the U.S. benchmark, WTI Crude, was up 0.93% at $71.30 per barrel.

By Tsvetana Paraskova for Oilprice.com

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  • George Doolittle on July 03 2023 said:
    Natural gas prices hammered lower as a result. Tesla now becoming a material exporter to China as well of a big ticket item(s) Model S and Model X Boeing always having been this way and still is remarkably.

    Distribution of fuel to the customer inside the USA continues to go through a dramatic transformation courtesy of Buc'ees et al so seeing this energy boom inside the United States play out well obviously this be vastly more important than what OPEC always does #wholly_predictable

    Still #worth_noting
  • Mamdouh Salameh on July 03 2023 said:
    The weakness of oil prices since the start of the year has nothing to do with global oil demand or market fundamentals or China’s economy.

    Therefore, neither the Saudi voluntary cut of 1.0 million barrels a day (mbd) in July nor its extension to August will have any effect. The cut has to do with Saudi Arabia's inability to produce 10.0 mbd. Therefore, I wouldn't be surprised if the Saudi cut is extended indefinitely.

    Oil prices will remain under pressure as long as there are fears of a global banking or financial crisis triggered by US banking difficulties and also fears that further hikes by the US Federal Bank could cause of one or two more US commercial banks to collapse.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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