Oil Producers Led by Saudis Extend Supply Cuts Amid Slack Prices

• Saudi Arabia and allied oil producing countries on Sunday extended output cuts through next year, a move aimed at supporting slack prices that haven’t risen even amid turmoil in the Middle East and the start of the summer travel season.
• The OPEC+ alliance, made up of members of the producer's cartel and allied countries, including Russia, extended three different sets of cuts totalling 5.8Mn barrels a day. International benchmark Brent has loitered in the US$81.0 to US$83.0 per barrel range for the past month.
• Even the war in Gaza and attacks on shipping in the Red Sea by Houthi rebels in Yemen have not pushed prices up toward the US$100.0 per barrel level last seen in September 2022. Reasons include higher interest rates, concerns about demand due to slower than desired economic growth in Europe and China, and rising non-OPEC supply, including from United States shale producers.
• Yet the Saudis need higher oil prices to fund ambitious plans by Crown Prince Mohammed bin Salman to diversify the country’s economy away from fossil fuel exports. Analysts say the cuts could push oil prices higher in coming months, but much depends on demand for oil going forward. The summer usually sees a spike in demand through the July-September quarter, but uncertainty about demand grows after that.
• The cuts that are being extended break down as follows: two billion barrels a day agreed among all 23 OPEC+ members were extended through the end of 2025, according to an OPEC statement; then, voluntary reductions of 1.65Mn barrels a day by a smaller group of members was extended until end 2025 as well, according to a report on the official Saudi Press Agency.

(Source: Reuters)