Saudi Arabia will cut oil production by one million barrels a day in a bid to prop up oil prices, the Financial Times has reported. The decision was announced after what is said to have been a fractious meeting of the group of major oil-producing countries known as OPEC+ in Vienna yesterday. The Saudi cut would be for one month beginning in July but could be extended.
The agreement, the result of lengthy negotiations on Saturday and Sunday, benefits some members more than one. The UAE has come out of the deal as a winner. Abu Dhabi will be permitted to increase its production while several weaker African members will have quotas reduced from next year. Russia, the world’s second-largest oil exporter after Saudi Arabia, could also have its production targets lowered, though the group said this was subject to review.
According to the New York Times Russia’s voluntary cut of 500,000 barrels a day announced in February has been included in the deal. There is said to be some dissatisfaction over the deal granted to Moscow. It’s reported that comments at the news conference after the meeting revealed scepticism that Russia was abiding by those lower production levels announced four months ago. Rights groups have slammed the decision, saying it is effectively “subsidizing Putin’s colonial invasion of Ukraine and his war crimes.”
A dip in oil price over the past ten months despite attempts to reverse the drop prompted the cut. An earlier cut was announced by Riyadh and other members in April but, after briefly rallying towards $90 a barrel, prices again reversed, falling to nearly $70 a barrel at one stage last week.
The reduction will lower Saudi Arabia’s output to nine million barrels a day in July, and comes in addition to a voluntary 500,000 barrel a day cut announced by the kingdom in April, when its output was around 10.5 million barrels a day. With Saudi Arabia’s capacity at 12 million barrels a day, the cut is seen by analysts as a “strong statement” by the kingdom.
Riyadh’s announcement comes days before US Secretary of State Antony Blinken is scheduled to visit the country for talks with Saudi leaders. Favouring lower oil prices, the news is likely to be met with displeasure in Washington. Under Crown Prince Mohammed Bin Salman, Riyadh has become more aggressive in its oil policies than in the past.