June 05, 2023 (MLN): Saudi Arabia will make a deep cut to its output in July on top of a broader OPEC+ deal to limit supply into 2024 as the group seeks to boost flagging oil prices, as Reuters reported.

Saudi energy ministry stated that the country’s output would drop to 9 million barrels per day (bpd) in July from around 10m bpd in May, the biggest reduction in years.

Saudi Energy Minister, Prince Abdul Aziz stated, "We wanted to ice the cake. We always want to add suspense. We don't want people to try to predict what we do… This market needs stabilisation".

OPEC+ produces around 40% of the total crude production, which indicates that its decisions can have a major impact on oil prices.

On Friday, Brent crude closed at $76.14, a 2.53% rise.

Saudi Arabia is the only member of OPEC+ with sufficient spare capacity and storage to be able to easily reduce and increase output.

OPEC+ has in place cuts of 3.66m bpd, amounting to 3.6% of global demand, including 2m bpd agreed last year and voluntary cuts of 1.66m bpd agreed in April.

On Sunday, OPEC+ said that the cuts would extend until the end of 2024.

OPEC and Russia are accused of manipulating oil prices and undermining the global economy through high energy costs.

In response, OPEC insiders have said the West's money-printing over the last decade has driven inflation and forced oil-producing nations to act to maintain the value of their main export, Reuters further added.

Amrita Sen, co-founder of Energy Aspects think-tank, said "It is a clear signal to the market that OPEC+ is willing to put and defend a price floor,"

In addition to extending the existing OPEC+ cuts the group also agreed on Sunday to reduce overall production targets from January 2024 by a further 1.4m bpd versus current targets to a combined of 40.46m bpd.

Whereas, the United Arab Emirates was allowed to raise output targets by around 0.2m bpd to 3.22m bpd

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Posted on: 2023-06-05T11:19:43+05:00