Inspenet, September 6, 2023.
Saudi Arabia and Russia announced last Tuesday their intention to extend their voluntary commitment to reduce oil production until the end of this year, despite the rebound in crude oil prices and the prospects that supplies will adjust in the last quarter.
This news boosted oil prices notably , with Brent topping $90 a barrel for the first time since November. This increase came despite the continued increase in oil exports from Iran and Venezuela. It is perceived that the United States is not applying the sanctions with the same severity as in previous years.
The production cuts, pushed by the world’s top oil exporter, were unveiled in June, then took effect for the first time in July, following an OPEC+ meeting.
This set includes countries that are part of OPEC, under the leadership of Saudi Arabia, as well as other allied nations, including Russia.
“The kingdom’s production for the months of October, November and December will be around nine million barrels per day,” the ministry said in a statement.
“This strategy will be reviewed on a monthly basis, with the possibility of adjusting production up or down,” he said.
According to Saudi Arabia, the fundamental purpose of this policy is “to support the stability and balance of the oil markets.”
The announcement made coincides with that of Russia, which also confirmed its commitment to maintain the reduction of its oil exports by 300,000 barrels per day until the end of the year .
This measure seeks to “reinforce the precautions taken by the OPEC+ countries to maintain the stability and balance of the oil markets,” Alexander Novak, Russia’s deputy prime minister in charge of energy, explained via Telegram.
The unilateral reduction in production by Saudi Arabia follows the decision made in April by several OPEC+ members to cut their production by more than one million barrels per day. Although this generated a brief increase in prices, it did not achieve a sustainable recovery.
At around 15:45 GMT on Tuesday, the price of Brent North Sea oil for November delivery rose 2.3%. Meanwhile, the price of crude oil in Texas reached 87.90 dollars, which represents an increase of 2.7%.
Impact of reduction in oil production
“Further reductions appear to have stimulated prices and supply appears tight in the fourth quarter despite increased production from Iran and some other countries,” Justin Alexander, a director at consultancy Khalij Economics, told AFP.
“However, this effort has come at a cost to the kingdom, which has reduced its offer,” he added.
Daily oil production from Saudi Arabia, the world’s largest crude exporter, stands at around 9 million barrels a day, which is significantly below its official daily capacity of 12 million barrels.
In August, the Saudi oil company Aramco announced earnings of $30.08 billion for the second quarter, marking a 38% decline compared to the same period in 2022, when oil prices soared due to the Russian invasion. in Ukraine.
This decline in profit is mainly attributed to the impact of falling crude oil prices , as well as weak refining and chemical margins, the company said, which is a fundamental pillar of the Saudi economy.
Saudi Arabia owns 90% of Aramco’s shares and relies heavily on oil revenue to finance Crown Prince Mohammed bin Salman’s ambitious Vision 2030 program. This program includes economic and social reforms designed to reduce the country’s dependence on oil.