In a major announcement on Sunday, Saudi Energy Minister Prince Abdulaziz bin Salman said that the country will begin slashing oil production by 1 million barrels per day starting in July. The move will reduce the Kingdom’s oil output to 9 million barrels per day, down from its current level of roughly 10 million barrels in May.
At a press conference following the meeting, the energy minister referred to the reduction as a “Saudi lollipop” for the OPEC+ alliance, indicating the Kingdom’s commitment to stabilizing the market.
Though the cut could be extended, the group will do everything in its power to bring stability to the market, he said. Analysts have noted that the move is not unexpected given the current landscape of the global oil industry.
Following the announcement, oil prices climbed by around 1.5%, with Brent futures up 1.6% at $77.34 a barrel and U.S. West Texas Intermediate futures rising by 1.5% to $72.83.
Analysts predict Brent futures may surge to $85 a barrel in Q4 2023, even as China’s demand for oil shows slow growth. Saudi Arabia has been cutting its oil production to keep prices stable. However, if Brent futures fall below $70 a barrel, the country may extend its July production cuts of 1 million barrels per day.
It’s likely that Saudi Arabia will deepen cuts in August if prices remain below that level. Experts warn that a relative shortage in oil supply could occur later this year, given the possibility of further cuts.
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- Lucy Walker covers finance, health and beauty since 2014. She has been writing for various online publications.
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