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Saudi Arabia and Russia have confirmed they will extend their voluntary production and export cuts until the end of the year in a largely expected move to keep a lid on a solid portion of global supply.
"This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," Reuters quoted a statement from the Saudi energy ministry as saying.
Saudi Arabia has been producing around 9 million barrels daily, effecting a voluntary reduction of some 1 million bpd.
Russia, for its part, has undertaken to reduce exports by 300,000 bpd and production by half a million barrels daily.
"The additional voluntary cut is intended to strengthen the measures taken by OPEC+ countries to maintain the stability and balance of oil markets," Deputy Prime Minister Alexander Novak said on Sunday.
Commenting on the Saudi and Russian updates, ING’s Warren Patterson and Ewa Manthey noted that this extension was expected but the market would be interested in whether the two would extend the cuts further into 2024. This might suggest the current extension was unlikely to have any immediate effect on prices but an extension into 2024 might move the benchmarks.
“Our oil balance shows that the market will be in surplus in 1Q24, which may be enough to convince the Saudis and Russians to continue with cuts through the seasonally weaker demand period of Q1,” the analysts wrote.
Prices moved up modestly after the Saudi and Russian announcements after both Brent and WTI booked a second losing week in a row last week. The biggest reason for the recent drop in prices looks to be the waning war premium from the war between Israel and Hamas, which appears to be contained for the time being and not a direct threat to Middle Eastern oil supply.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.