In a move to bolster oil prices, Saudi Arabia has announced an extension of its voluntary supply curbs with Russia for an additional month, with the possibility of further cuts in the future. Despite recent tensions between Riyadh and Washington over the matter, the Opec+ alliance, led by Saudi Arabia, is determined to stabilise the oil market. The production cuts, initiated by Opec+ leaders over the past year, have been a contentious issue with the White House seeking lower prices to support the economy ahead of next year’s election while limiting revenues to Russia. However, Saudi Arabia remains committed to maintaining higher prices to fund its ambitious investment program aimed at transforming its economy. The voluntary reduction, dubbed the “Saudi lollipop” or sweetener by Energy Minister Prince Abdulaziz bin Salman, was initially implemented in July and has now been extended until the end of September. The cuts amount to 1 million barrels per day, effectively keeping Saudi Arabia’s oil output at 9 million barrels per day, 25 percent lower than its maximum capacity of 12 million barrels per day.
The extension of the production cuts could potentially strain Saudi Arabia’s relationship with the White House, as it seeks to find common ground between supporting the global economy and funding ambitious development projects. Senior advisers to President Joe Biden have visited Riyadh in an attempt to broker a formal relationship between Saudi Arabia and Israel, including discussions on energy matters. The global energy landscape remains influenced by geopolitical considerations, with Russia also seeking higher oil prices to fund its involvement in the Ukraine conflict. Europe’s reduced gas exports from Russia have added pressure on the country to secure alternative revenue sources. As the world closely watches the developments in the oil market, the Opec+ alliance’s decision to extend the production cuts will continue to impact oil prices and the global economy. With the possibility of further cuts, market participants will keep a close eye on how Saudi Arabia balances its ambitious projects and the need to support the global economic recovery. What do you think about the situation with OPEC? And what will happen going forward?
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.