Saudi Arabia To Cut Production, Stem Oil Price Slide
Major oil producers in OPEC Plus decided to continue cutting their production. Saudi Arabia will be cutting further for one month.
Today is June 4, 2023. It's already the afternoon - 3:38 p.m. to be exact. We're updating our blog section to keep you informed.
OPEC Plus made a deal to fix the problem of oil prices dropping. They plan to adjust production. Saudi Arabia will cut one million barrels a day.
Starting from July, Saudi would cut for one month, might be prolonged.
The group of countries led by Russia needed to make a deal about oil. People were feeling negative about the market. They've already made two big cuts, but the price of oil has still gone down 15 percent in seven months.
After long negotiations on the weekend, an agreement was reached. Some countries will produce more, but others will produce less. The United Arab Emirates will produce more. Richard Bronze from Energy Aspects called it a complicated deal.
Moscow declared in February that it will voluntarily reduce daily oil production by 500,000 barrels. This decision is part of an agreement.
People were not convinced that Russia was actually producing less, according to comments made at the news conference. Russia produces a lot and is selling more to places like India, which is causing trouble for Middle Eastern oil companies. This is making everyone in the group very upset.
The oil minister of the United Arab Emirates, Suhail al Mazrouei said that some of the data from Russia does not make sense. Mazrouei thinks Russian officials are trying to explain the numbers.
OPEC Plus wants a steady oil market. They aim to be proactive and preemptive.
The markets think that the main thing about the deal is Saudi Arabia cutting production more. They'll go down to nine million barrels a day. Prince Abdulaziz bin Salman said it's the "Saudi lollipop" at the news conference.
Prince Abdulaziz agreed to take an immediate hit despite suggesting cuts beforehand.
He got some wins for the long run. OPEC Plus is trying to fix some issues that have made it hard to understand their production decisions. Countries like Nigeria and Angola couldn't reach their goals because they didn't have enough investments and more concerns. They will lose quotas beginning in 2024.
The United Arab Emirates is spending lots of money to make more oil. They got a little bit of good news on Sunday. They are allowed to produce 200,000 more barrels of oil every day in 2024. The United Arab Emirates wants to make more oil. They had a fight with Saudi Arabia about it in 2021 and even talked about leaving OPEC.
The discussion about quotas went on till evening in Vienna. The countries have their economies and governments tied to oil. Hence, it was expected.
Mr. Bronze thinks the agreement solves group problems. He thinks there is real substance in it. As the market learns more, they will feel the same way.
The oil officials had a meeting to discuss the weakened markets. Prince Abdulaziz warned that they might cut production to increase prices and stop traders from betting on lower prices.
Russia and some other producers don't want to reduce production as much as others.
The meeting on Sunday happened two months after OPEC Plus made some cuts. They started in May and haven't affected much. Economic factors, like China's poorer economic growth, have made oil prices go down by 12%. The cuts may not have a big effect because of this.
Brent crude prices went up around $3 a barrel on Thursday and Friday. This happened after Washington agreed on the debt ceiling. The current price is now around $76. However, it's slightly lower than the price before the April cut.
Saudi Arabia announced this just a few days before Antony Blinken's visit. The U.S. Secretary of State is set to meet with Saudi leaders.
Saudi Arabia leads OPEC Plus. Prince Abdulaziz and his half-brother Crown Prince Mohammed bin Salman are in charge. They have strong oil policies. They prefer making cuts to keep prices stable. They don't let markets go wherever they want.
The Crown Prince wants lots of money from oil. He needs it for his big plans. He is in charge of making policies.
OPEC doesn't say how much they want oil to cost. But experts say the Saudis don't want prices under $80 a barrel of Brent crude. OPEC Plus makes more than 40 percent of the world's oil, so they can affect prices a lot.
Saudi-led cuts by OPEC caused issues with Biden's administration. They desire lower oil prices to make things easier on American drivers. They also want to avoid harming the global economy that is already struggling.
Stanley Reed writes for The Times in London. He covers energy, the environment and the Middle East. Stanley began writing for The Times in 2012. Before that, he was the chief of BusinessWeek magazine's London office. You can find him on Facebook or on Twitter as @stanleyreed12.
