RIYADH: Saudi Arabia said on Monday (July 3) it was extending a voluntary oil production cut and Russia said it was slashing exports, as major producers tried to prop up slumping prices.
The cut by Riyadh of one million barrels per day was first announced after a June meeting of oil producers and took effect at the weekend.
Saudi Energy Minister Prince Abdulaziz bin Salman noted at the time that it was “extendable”.
In a report on Monday announcing that the cut would continue through August, the official Saudi Press Agency said it “can be extended” further, citing an energy ministry source.
“The source confirmed that 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,” SPA said.
Also on Monday, Russia unveiled its export cut of 500,000 bpd for August “as part of efforts to ensure that the oil market remains balanced”.
The announcement by Alexander Novak, Russian deputy prime minister responsible for energy policy, came on the back of cuts to Russian oil production this year by the same volume as part of Moscow's response to Western sanctions levied over the conflict in Ukraine.
Recent efforts by Opec+ to bolster prices by reducing output have not succeeded, and analysts expressed doubt this one would be any different despite initial increases recorded Monday.
“It’s the usual knee-jerk reaction to reports of production cuts,” said IG analyst Chris Beauchamp.
“But given ... it’s not a coordinated move from all (Opec+) members it seems hard to imagine there’s much more upside in this.”
Another Opec member, Algeria, announced on Monday an additional cut of 20,000 bpd for August on top of a voluntary cut of 48,000 bpd approved in April.
The decision was taken “in support of” the Russian and Saudi cuts to promote “stability and balance in the oil markets”, and stands to bring Algerian production in August to 940,000 bpd, the energy ministry said.
“Saudi Arabia is hoping to bring down global inventories over the summer in order to lend support to prices,” said Jamie Ingram, senior editor at MEES.
“There will be little expectation that Russia will fully comply with this latest commitment, but the key thing here is that it’s a public statement of commitment to Saudi Arabia’s market management strategy.”
Saudi Arabia is counting on high oil prices to fund an ambitious reform agenda that could shift its economy away from fossil fuels.
Analysts say the kingdom needs oil to be priced at US$80 per barrel to balance its budget, which is well above recent averages. – AFP