Saudi Arabia, Russia extend oil cuts until December, crude jumps to highest level in 2023

Saudi Arabia will extend its voluntary oil production cuts of one million barrels per day, for the rest of the year, as per a report by state-run Saudi Press Agency (SPA).

The extension of the oil production cuts for another three months was revealed by an official source from the kingdom’s Ministry of Energy, reported SPA.

Saudi Arabia implemented crude oil production cuts in July which was then extended to include August and September. In effect, the country’s production for the coming months of October, November, and December will be approximately 9 million barrels per day.

The report added that the voluntary cut will be reviewed monthly to consider reducing or increasing production. Saudi Arabia’s oil output is likely to remain at 9 million barrels per day until the end of December, 25 per cent lower than its maximum capacity of 12 million barrels per day.

This cut is in addition to the voluntary cut previously announced by Saudi Arabia in April 2023, which extends until the end of December 2024.

Russia announces production cuts

Saudi Arabia’s announcement came in tandem with its OPEC+ member country Russia which also announced the extension of additional voluntary cuts in oil production until the end of the year. Russia’s Deputy Prime Minister Alexander Novak said the oil producer would cut production by 300,000 barrels per day until the end of December 2023.

In a statement carried by the Russian Government website, the deputy prime minister said the decision to reduce oil production will be reviewed monthly to consider the possibility of deepening the reduction or increasing production, depending on the situation in global energy markets.

The measure is in addition to the voluntary reduction previously announced by Russia in April 2023, which will last until the end of December 2024.

Oil prices jump

The additional voluntary reduction of oil supplies for export is aimed at strengthening the precautionary measures taken by OPEC+ countries in order to maintain stability and balance of oil markets, the SPA reported.

Oil prices rose above $90 a barrel for the first time in 2023 on the back of the announcements made by Saudi Arabia and Russia.

Brent crude, the international benchmark, moved up 1.2 per cent at $90.04 on Tuesday, breaking $90 a barrel for the first time since November 2022. US’ West Texas Intermediate settled at $86.69, going up by a similar margin.

US national security adviser Jake Sullivan said after the announcement from Saudi Arabia on Tuesday that President Joe Biden was focused on doing “everything within his toolkit to be able to get lower prices for consumers at the gas pump in the United States”.