Russia and Saudi Arabia’s simultaneous announcement could soon impact us.

Saudi Arabia and Russia Extend Oil Production Cuts to Boost Prices

Saudi Arabia and Russia, two of the world’s largest oil producers, are taking measures to support oil prices by extending cuts to their oil production. Despite weakened demand due to the economy, these countries are determined to increase income from fossil fuels.

The decision to extend production cuts has already had a positive impact on oil prices, providing a slight boost. The announcement comes after Saudi Arabia announced a significant reduction in output for July during the latest meeting of the OPEC+ coalition of oil producers. This has raised concerns about potential increases in gasoline prices for U.S. drivers.

The Saudi Energy Ministry has confirmed that the cut of 1 million barrels per day, implemented in July, will be extended through August. This move aims to maintain the stability and balance of oil markets, keeping Saudi Arabia’s output at 9 million barrels per day.

In addition, Russia has announced that it will further reduce production by an additional 500,000 barrels a day in August, according to Russian news reports.

These voluntary reductions build upon earlier cuts agreed upon by the OPEC oil cartel, led by Saudi Arabia, and allied producers, led by Russia, which are set to continue through next year.

Despite these efforts, the impact on oil prices has been limited, providing some relief to consumers worldwide. U.S. drivers have been able to fill their tanks more affordably during the busy summer travel season, and the average price for a gallon of gas in the U.S. is currently $3.53, down $1.28 per gallon from last year.

While benchmark U.S. crude and international standard Brent crude experienced some gains, the overall effect on oil prices has been modest. U.S. crude has been struggling for some time, and it recently rose above $70 per barrel for the first time in five weeks.

The decision by Saudi Arabia to implement further cuts reflects the uncertain outlook for fuel demand in the coming months, despite the increase in travel. For example, the U.S. experienced an all-time high in airline passengers during the Fourth of July weekend. However, concerns remain regarding economic weakness in the U.S. and Europe, as well as China’s slower rebound from COVID-19 restrictions.

Both Saudi Arabia and Russia have their own motivations for sustaining high oil revenue. Saudi Arabia needs the funds to support ambitious development projects aimed at diversifying its economy, while Russia seeks to bolster profits to finance its war against Ukraine. Western sanctions have forced Russia to sell its oil at a discount to countries like China and India, resulting in a significant decline in export revenue.

Despite previous cuts, Russia’s output in August will still be reduced by 1 million barrels a day. However, it is worth noting that in May, Russia only decreased production by 400,000 barrels instead of the promised half-million, according to Rystad Energy.

The Western Journal has reviewed this Associated Press story and may have altered it prior to publication to ensure that it meets our editorial standards.

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