Saudi Energy Minister Prince Abdulaziz has stated that if necessary, the reduction of one million barrels per day (bpd) by Riyadh could be extended beyond July. He referred to this reduction as a “Saudi lollipop.”
The OPEC+ alliance, comprising the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC allies led by Russia, reached an agreement on output policy after lengthy talks. They decided to further reduce the overall production targets from 2024 by 1.4 million bpd.
However, it should be noted that some of these reductions will not actually lead to decreased production as the group adjusted the targets for Russia, Nigeria, and Angola to align them with their current production levels.
In contrast, the United Arab Emirates was permitted to increase its output. OPEC+ collectively accounts for around 40 percent of global crude production, indicating that its policy decisions significantly impact oil prices.
OPEC+ had already implemented a cut of 2 million bpd last year, which accounted for 2 percent of global demand. In April, they surprised the market by announcing a voluntary cut of 1.6 million bpd, effective from May until the end of 2023.
Saudi Arabia confirmed that it would extend its voluntary cuts of 0.5 million bpd into 2024. It is unclear whether the additional reduction of 1 million bpd in July is on top of the 0.5 million bpd or if the latter is already included in the July reduction.
While the April announcement initially pushed oil prices up by approximately $9 per barrel to over $87, prices quickly retreated due to concerns about global economic growth and demand. As of Friday, the international benchmark Brent settled at $76 per barrel.
Western nations have accused OPEC of manipulating oil prices and adversely affecting the global economy with high energy costs. They have also criticized OPEC for aligning with Russia despite Western sanctions related to Russia’s actions in Ukraine.