Saudi Arabia to reduce oil output by 1 million barrels/day for price increase.

The Organization of the Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, showed their commitment to higher oil prices in their meeting on June 4, with Saudi Arabia announcing additional output cuts and some other members extending their voluntary cuts until the end of 2024.

“Following their meeting in Vienna, OPEC+ members extended their voluntary supply cuts until the end of 2024, which were first announced in April and were supposed to expire at the end of 2023,”

In addition, the Saudi Arabian Ministry of Energy has announced that beginning in July, the country will implement a further voluntary cut in its crude production, amounting to one million barrels per day (bpd). This additional oil cut can be prolonged beyond July, the news agency reported. As a result, Saudi Arabia’s output will be reduced to 9 million bpd in July, and its total voluntary cut will be 1.5 million bpd.

Tensions Rise Between Saudi Arabia and Russia

The decision comes after the OPEC+ crude oil producers announced surprise additional production cuts of about 1.16 million barrels per day (bpd) in April. However, tensions are rising between Saudi Arabia and Russia, two of the world’s largest oil producers, over output limits, according to a report from the Wall Street Journal. The report stated that Russia continues to push massive amounts of cheaper oil into the market, undercutting Saudi Arabia’s efforts to raise oil prices.

Impact on U.S. Consumers

OPEC+, composed of 23 oil-producing countries, produced about 60 percent of global oil production in 2022. These production cuts have been a major source of concern for the Biden administration, since they may eventually harm U.S. consumers by increasing inflationary pressures, particularly.

Summary

• OPEC+ extends voluntary supply cuts until the end of 2024
• Saudi Arabia announces additional output cuts, reducing output to 9 million bpd in July
• Tensions rise between Saudi Arabia and Russia over output limits
• Production cuts may eventually harm U.S. consumers by increasing inflationary pressures