The Saudi cut of 1 million barrels per day comes as the other OPEC+ producers agreed to extend earlier production cuts through next year.
Saudi Arabia will reduce how much oil it sends to the global economy, taking a unilateral step to prop up the sagging price of crude after two by major producing countries in the OPEC+ alliance .
The Saudi cut of 1 million barrels per day, to start in July, comes as the other OPEC+ producers agreed in a meeting in Vienna to extend earlier production cuts through next year.
Calling the reduction a “lollipop,” Saudi Energy Minister Abdulaziz bin Salman said at a news conference that “we wanted to ice the cake.” He said the cut could be extended and that the group “will do whatever is necessary to bring stability to this market.”
The new cut would likely push up oil prices in the short term, but the impact after that would depend on whether Saudi Arabia decides to extend it, said Jorge Leon, senior vice president of oil markets research at Rystad Energy.
The move provides “a price floor because the Saudis can play with the voluntary cut as much as they like,” he said.
The slump in oil prices has helped U.S. drivers fill their tanks more cheaply and gave consumers worldwide some relief from inflation.
“Gas is not going to become cheaper,” Leon said. “If anything, it will become marginally more expensive.”
That the Saudis felt another cut was necessary underlines the uncertain outlook for demand for fuel in the months ahead. There are concerns about economic weakness in the U.S. and Europe, while China’s rebound from COVID-19 restrictions has been less robust than many had hoped.
