Oil prices surge as Saudi Arabia prepares to cut output

Joy Onuorah
Joy Onuorah
Oil prices surge as Saudi Arabia prepares to cut output

Saudi Arabia has announced a significant cut of one million barrels per day in its July production.

The decision by the leading oil-producing nation, supported by other OPEC+ members, aims to bolster the floundering prices and restore stability to the market.

OPEC+ comprises a coalition of oil-producing countries that collectively account for approximately 40% of the world’s crude oil.

Their coordinated actions have the power to wield a substantial influence over global oil prices.

As news of the production cuts spread, Brent crude oil experienced a surge of up to 2.4% in Asian trade on Monday, eventually settling around $77 per barrel.

Notably, OPEC+ also confirmed plans to further reduce production targets by an additional 1.4 million bpd starting in 2024.

This long-term commitment underscores their determination to counter market challenges and ensure a sustainable balance between supply and demand.

The oil-rich nations engaged in a marathon seven-hour meeting on Sunday against a backdrop of declining energy prices.

While oil prices soared in the wake of Russia’s invasion of Ukraine last year, they have since retraced to pre-conflict levels.

This prompted OPEC+ to take swift action and implement measures to address the downward spiral.

In October 2022, the OPEC+ coalition agreed to reduce production by two million bpd, equivalent to approximately 2% of global demand.

In April this year, they extended the production cuts until the end of 2021. However, during Sunday’s talks, Russian Deputy Prime Minister, Alexander Novak, announced that the agreement would now extend until the end of 2024, solidifying the long-term commitment of the alliance.

Saudi Energy Minister, Prince Abdulaziz bin Salman, affirmed that if necessary, the one million bpd cut by Saudi Arabia could extend beyond July.

“This is a Saudi lollipop,” he remarked, emphasizing the Kingdom’s dedication to market stability.

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