Tuesday, 23 July 2024
CommodityMiddle EastPolitics

Saudi Arabia Reduces Production Even More to Raise Oil Prices

After a conference of key producers, Riyadh announced a new reduction in oil production to support prices in spite of recessionary concerns. The Organisation of the Petroleum Exporting Countries (OPEC), which has 13 members, experienced difficult negotiations with its 10 partners, led by Russia.

According to Saudi Arabia‘s Energy Minister Prince Abdulaziz bin Salman, the country’s reduction of a million barrels per day is only for July but is “extendable.” Analysts had anticipated that OPEC+ producers would stick with their current course, but there were indications that 23 nations were considering even bigger cuts.

Reduces Production

In light of Russia’s invasion of Ukraine, oil producers are struggling with declining prices and increasing market volatility. Since the April cuts were announced, oil prices have fallen by approximately 10%, with Brent crude plunging to about $70 per barrel.

As the US fights inflation and increasing interest rates, traders are concerned about the global economy and anticipate a decline in demand. Alexander Novak, the deputy prime minister of Russia, announced that the present output restrictions had been extended until the end of 2024 after being thought over “for a long time.”

  • Riyadh reduces oil production amid recession amid OPEC negotiations.
  • Saudi Arabia announces extendable barrel reduction for July; 23 nations considering larger cuts.
  • US inflation, interest rates rise, global economy concerns rise; Russia extends output restrictions.

Despite not meeting their quotas, Bloomberg news agency reports that African nations have been hesitant to give up some of them.

The conference was widely observed since Saudi Arabia wants to raise prices to balance its budget while Russia wants to sustain production. Due to the conflict in Ukraine and Western sanctions, Russia depends heavily on its oil income.

Currently, the break-even price for Saudi Arabia is $80 per barrel. When Moscow resisted reducing oil production in March 2020, the alliance was forced to the verge of dissolution.

Before the two nations came to an agreement, Riyadh increased shipments to record highs when negotiations failed. Following Riyadh’s action, analysts forecast a short-term increase in oil prices. The OPEC+ nations’ subsequent gathering is slated for November 26.

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