Oil prices rose close to $90 a barrel the other week as Saudi Arabia and Russia said they would extend their voluntary production and export cuts until the end of the year.
Saudi Arabia, which leads the expanded OPEC+ cartel with Russia, has cut an additional 1 million barrels a day from the global market since July, in what was originally billed as a temporary measure. But having already extended the cut until the end of September, Saudi Arabia reported it would keep its 1 million barrel per day reduction in place until the end of December.
Russia has added its own voluntary export cuts in recent months, saying that its 300,000 barrels per day export reduction would stay in place until the end of the year.
The move, which threatens to reignite inflation concerns globally, is the latest effort by two of the world’s largest oil producers, to boost prices despite much of the world grappling with higher energy costs.
Source: Trading Economics
The moves will raise tensions with the White House, which has criticised Saudi Arabia for collaborating with Russia, despite Moscow’s invasion of Ukraine and its weaponisation of gas supplies to Europe.
The Biden administration is keen to keep pump prices in check ahead of the Presidential election next year, where inflation and fuel costs have already become areas of attack for the Republican party.
Russian President Putin will likely attempt to use oil supplies to influence the US election. As Donald Trump has suggested he will try to make Ukraine negotiate with Moscow. Saudi Arabia also has a close relationship with Trump, who made the kingdom his first overseas visit in 2017 ahead of scrapping the Iran nuclear deal.
Brent crude is up about 15% since the cuts took effect at the start of August.
Saudi Arabia’s state media said the decision would still be reviewed monthly, but emphasised output could be revised up or down, indicating the kingdom had not ruled out further production cuts.
Its output has been reduced from about 10.5 million barrels per day in April to about 9 million barrels per day, through a combination of OPEC+ mandated production targets and its voluntary cuts. The latest announcement means Saudi Arabia’s oil output is likely to remain at 9 million barrels per day until the end of December, 25% lower than its maximum capacity of 12 million barrels per day.
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