Saudi Arabia goes alone at OPEC with million-barrel output cut: Report

Saudi Arabia will make an extra 1 million barrel-a-day oil supply cut in July, taking its production to the lowest level for several years after a slide in crude prices, Bloomberg reported.

The bold move by the most important member of the OPEC coalition came at the cost of ceding ground to two key allies: Russia, which made no commitment to cut output deeper, and the United Arab Emirates, which secured a higher production quota for 2024, said the report.

The kingdom is doubling down after the previous round of curbs — agreed just two months ago — failed to deliver a sustained price rally. The Organization of Petroleum Exporting Countries announced a surprise supply reduction of about 1.6 million barrels a day in early April, but since then weak economic data from China have weighed on oil futures, which fell 11% in New York in May, the report noted.

Following the production cuts, West Texas Intermediate jumped almost 5% early in the session on Monday before paring some gains to trade above $73 a barrel. Global benchmark Brent climbed towards $78 a barrel.

The Saudi effort to bolster the price of its most important export requires the sacrifice of further market share. Global oil demand is forecast to hit a record high this year, but the additional cuts announced on Sunday will bring Saudi production to about 9 million barrels a day in July, the lowest since June 2021, when output was still recovering from the depths of the Covid-19 pandemic.

The main winner from the weekend’s OPEC talks was the United Arab Emirates, which gets a boost to its production limit for next year at the expense of some African members, which were asked to give up part of their unused quotas, according to the report.

Russia, the second-largest OPEC producer, wasn’t required to make any additional cuts this year, but like other members, it extended its existing curbs by 12 months to the end of 2024, the report said.

Moscow has increasingly been competing with its Middle East OPEC allies in Asian markets since Europe banned most imports of its oil. There have also been questions about whether it has fully implemented its pledged production cuts in recent months due to the high volumes of its exports, it stated.

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