 "Crude oil")
Saudi Arabia and Russia agreed on Tuesday to extend their voluntary oil production cuts through the end of this year, trimming 1.3 million barrels of crude out of the global market and boosting energy prices.
The dual announcements from Riyadh and Moscow pushed benchmark Brent crude above $90 a barrel in trading Tuesday afternoon jumping over 2 per cent, a price unseen in the market since November last year.
The countries' moves likely will increase the cost for motorists at gasoline pumps and put new pressure on Saudi Arabia's relationship with the United States. President Joe Biden last year warned the kingdom there would be unspecified “consequences” for partnering with Russia on cuts as Moscow wages war on Ukraine.
Saudi Arabia's announcement, carried by the state-run Saudi Press Agency, said the country would monitor the market and take action if necessary. “This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” the Saudi Press Agency report said, citing an unnamed Energy Ministry official.
State-run Russian news agency Tass quoted Alexander Novak, Russia's deputy prime minister and former energy minister, as saying Moscow would continue its 300,000 barrel a day cut. The decision “is aimed at strengthening the precautionary measures taken by OPEC+ countries in order to maintain stability and balance of oil markets,” Novak said.
Benchmark Brent crude traded Tuesday at $90 a barrel immediately after the announcement. Brent had largely hovered between $75 and $85 a barrel since last October. There was no immediate reaction in Washington, though US lawmakers have criticized OPEC, Saudi Arabia and Russia over their past production decisions.
The average gallon of regular unleaded gasoline in the US stands at $3.81, according to AAA. That's up just a few cents from this time last year, coming after the Labour Day weekend's typically higher prices.
The Saudi reduction, which began in July, comes as the other OPEC+ producers have agreed to extend earlier production cuts through next year.
A series of production cuts over the past year has failed to substantially boost prices amid weakened demand from China and tighter monetary policy aimed at combating inflation. But with international travel back up to nearly pre-pandemic levels, the demand for oil likely will continue to rise.
The Saudis are particularly keen to boost oil prices in order to fund Vision 2030, an ambitious plan to overhaul the kingdom's economy, reduce its dependence on oil and to create jobs for a young population. The plan includes several massive infrastructure projects, including the construction of a futuristic $500 billion city called Neom.
