In a bid to support slumping prices, Saudi Arabia has announced an extension of its voluntary oil production cut by one million barrels per day. The cut, which was initially implemented for July, will now continue into August and is potentially extendable, according to an energy ministry source cited by the official Saudi Press Agency (SPA).
The additional voluntary cut aims to reinforce the precautionary efforts made by OPEC+ countries, with the goal of stabilizing and balancing oil markets, the SPA reported. With this extension, the daily production of the world's largest oil exporter will remain at around nine million barrels per day.
Prince Abdulaziz bin Salman, the Saudi Energy Minister, had announced the production cut after the meeting of oil producers last month, highlighting its potential for further extension. However, the voluntary production cuts implemented by several OPEC+ members in April, totaling over one million barrels per day, failed to bring about a lasting recovery despite briefly boosting prices.
Oil producers worldwide are currently facing challenges such as falling prices, high market volatility, and the ongoing repercussions of Russia's invasion of Ukraine. Additionally, China's economic recovery has been faltering, further impacting the oil market.
For Saudi Arabia, maintaining high oil prices is crucial to financing its ambitious reform agenda aimed at diversifying its economy away from fossil fuels. Analysts estimate that the kingdom needs oil to be priced at $80 per barrel to balance its budget, a value significantly higher than recent averages.
As the global financial landscape continues to evolve, Saudi Arabia's decision to extend the oil production cut reflects its commitment to stabilizing the oil market and ensuring the success of its economic reform plans.
