Ahmed Ali In an official declaration, Saudi Arabia proclaimed it will extend its oil production restrictions through September, extending the reduction in output that has stirred disapproval from the US.
Riyadh Continues to Uphold Restrictions on Oil Production
On Thursday, Saudi Arabia affirmed it will continue to restrict oil production by nearly one million barrels per day below its assigned quota for an additional month, as confirmed by an official statement from the Saudi Ministry of Energy, as reported by the state-operated Saudi Press Agency.
The self-imposed supply constraint, which initiated in July in tandem with Russia’s cutback of 300,000 barrels per day, aims to bolster oil prices amidst apprehensions over decelerating economic growth. However, preceding decisions of this nature have irked US officials who have been encouraging producers to augment output in order to diminish fuel expenses.
BREAKING: Saudi Arabia has prolonged its 1-million barrel oil cut to September
Oil has surged by 2% today, extending its upward trend since June 2023
— Game of Trades (@GameofTrades_) August 3, 2023
When OPEC+ initially revealed plans in April to slash two million barrels daily, inclusive of one million less barrels from Riyadh, the White House voiced its opinion that such a move was unwise. Even though crude prices have since decreased, fuel prices in the US have recently peaked to a nine-month high.
The declaration from Saudi Arabia that it will sustain its voluntary (1 mbd) cut through September, with possibilities of being “prolonged” and “intensified,” has led to a rise in oil prices.#economy #econtwitter #oil #SaudiArabia
— Mohamed A. El-Erian (@elerianm) August 3, 2023
Any further restraints by OPEC+ are predicted to vex Biden’s administration, which is focusing on controlling inflation. In an interview with CNN Business, Robert Yawger, the vice president of energy futures at Mizuho Securities, indicated that both Russia and Saudi Arabia are reliant on elevated oil prices.
Yawger observed to CNN, “This contravenes the US’s efforts to subdue inflation.”
US gas prices are currently averaging at $3.869 per gallon of gasoline, while last week’s average was around $3.711 per gallon. In comparison, in June 2022, the average fuel prices in the US reached an all-time peak of $5.02 per gallon.
Yawger told the news outlet, “$4 is the critical point. Upon reaching $4, demand collapses. It destroys the economic viability,” added the Mizuho Securities executive. Some analysts credit the soaring US gas prices to “the severe and ongoing heatwaves.”
In June 2023, Saudi Energy Minister Prince Abdulaziz bin Salman justified the self-imposed reductions in oil production.
During a conversation with CNBC’s Dan Murphy, Abdulaziz stated, “It was merely our understanding, should you label it as such, that the environment wasn’t adequately ensuring confidence. Therefore, adopting a safety measure tends to safeguard you. It’s part of the standard strategy we’ve implemented in OPEC, which involves being proactive and preventive. We possess this tool. It doesn’t imply we’re certain that things will deteriorate or veer off course.”
What’s your perspective on Saudi Arabia persisting with its oil production cuts for another month? Express your viewpoints and thoughts on this matter in the comments section below.
Table Of Contents
Frequently Asked Questions (FAQs) about Saudi Arabia oil production cuts
How long has Saudi Arabia extended its oil production cuts?
Saudi Arabia has announced the extension of its oil production cuts through September.
What has been the US’s response to these oil production cuts?
The US officials have criticized these cuts as they believe that increasing oil output can help lower fuel costs.
How have these cuts affected oil prices?
The announcement of Saudi Arabia’s decision to maintain its voluntary oil production cuts has led to a rise in oil prices. As a result, fuel prices in the US have hit a nine-month high.
Who else has reduced their oil production?
Alongside Saudi Arabia’s self-imposed oil production cuts, Russia has also cut its oil production by 300,000 barrels per day.
What is the average price of gas in the US?
As of the time of reporting, US gas prices are averaging at $3.869 per gallon of gasoline.
How has the energy market reacted to Saudi Arabia’s decision?
The energy market has responded to Saudi Arabia’s decision with a 2% increase in oil prices on the day of the announcement.
What were the reasons behind Saudi Arabia’s decision to cut oil production?
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, stated that these self-imposed reductions in oil production were made as a precautionary measure due to the uncertain environment and to uphold OPEC’s proactive and preventive strategy.
More about Saudi Arabia oil production cuts
- Saudi Arabia’s Ministry of Energy
- OPEC’s oil production policies
- CNN Business interview with Robert Yawger
- CNBC’s interview with Saudi Energy Minister Prince Abdulaziz bin Salman
5 comments
Saudi Arabia’s moves are hard to predict. u think they care about our inflation? no way
Can’t belive gas prices may hit $4 per gallon again. Seriously considering a switch to electric…
Can’t belive gas prices may hit $4 per gallon again. Seriously considering a switch to electric…
wow, oil cuts again! these prices are killin us at the pump… when will it end?
Interesting strategy by the saudis to protect their interest, though US consumers are the ones to bear the brunt 🙁