Oil Prices Rise As Saudi Arabia Pledges Output Cuts

Oil prices have risen after Saudi Arabia said it would make cuts of a million barrels per day (bpd) in July.

Other members of Opec+, a group of oil-producing countries, also agreed to continued cuts in production in an attempt to shore up flagging prices.

Opec+ accounts for around 40% of the world’s crude oil and its decisions can have a major impact on oil prices.

In Asia trade on Monday, Brent crude oil rose by as much as 2.4% before settling at around $77 a barrel.

Opec+ said production targets would drop by a further 1.4 million bpd from 2024.

The seven hour-long meeting on Sunday of the oil-rich nations came against a backdrop of falling energy prices.

Oil prices soared when Russia invaded Ukraine last year, but are now back at levels seen before the conflict began.

In October last year Opec+, a formulation which refers to the Organization of Petroleum Exporting Countries and its allies, agreed to cut production by two million bpd, about 2% of global demand.

In April this year the group agreed to further cuts, which were due to last to the end of this year. But Russian Deputy Prime Minister Alexander Novak said that Sunday’s talks led to “the extension of the deal until the end of 2024”.

On Sunday, Saudi Energy Minister Prince Abdulaziz bin Salman said that his country’s cut of one million bpd could be extended beyond July if needed. “This is a Saudi lollipop,” he said, in what is seen as a bid to stabilise the market.

Before the two-day Opec+ meeting started, it was widely expected the oil cartel would make production cuts to prop up prices. It appears most members were against the idea, as any cuts would impact oil revenues, which are crucial to keep running their economies.

Saudi Arabia’s decision to make a voluntary reduction of one-million barrels per day was unexpected but does not come as a huge surprise. As the leader of the pack, and also the largest exporter of oil, it was the only one in a position to be able to lower output.

Chioma Kalu

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