Saudis and Russia extend oil supply cuts, sending prices up

SAUDI Arabia will prolong its unilateral oil production cut by one month, keeping a lid on supply even as the market is expected to tighten. Its Opec+ ally Russia also announced fresh curbs on exports.

The Saudi output reduction of 1 million barrels a day that started this month – which comes in addition to existing curbs agreed by Opec+ – will continue into August and could be extended further, according to a statement published by state-run Saudi Press Agency. The cuts will take the kingdom’s production to about 9 million barrels a day, the lowest level in several years, sacrificing sales volumes for what has so far been little reward in terms of higher prices.

Oil prices jumped, with Brent crude rising 1.3 per cent to US$76.39 a barrel as of 10.34 am in London.

The Saudi effort will be assisted by Russia, which will reduce oil exports by 500,000 barrels a day in August, Deputy Prime Minister Alexander Novak, said in comments published by his press service. Still, Moscow has dragged its heels on cutbacks agreed with Opec+ so far this year.

Lacklustre demand in China has capped crude near US$75 a barrel, below the level Saudi Arabia needs to cover its budget. Against this backdrop, the extension of the kingdom’s cuts was no surprise, with almost all traders and analysts surveyed by Bloomberg predicting this outcome.

Oil prices were widely expected to rally this year, but have instead sagged about due to fears about the strength of the economy as interest rates climb. Supply is still expected to tighten in the second half, but Wall Street forecasters including Goldman Sachs Group and Morgan Stanley have abandoned projections for the return of US$100-a-barrel crude.

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Oil prices range-bound amid tighter supply, slow demand fears

Asia refiners expect Saudi Arabia to cut August crude prices

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Consuming nations like the US have railed against the Organization of Petroleum Exporting Countries and its allies for their policy of constricting supplies, accusing the cartel of exacerbating inflation and endangering a fragile economic recovery. The International Energy Agency has condemned the group for laying “siege” to vulnerable consumers. BLOOMBERG