Saudi Arabia Continues Voluntary Cut in Oil Production Amid Declining Prices

In a strategic move to stabilize dwindling oil prices, Saudi Arabia declared on Monday its decision to persist with a voluntary cut in oil production of one million barrels per day. Initially instituted in July, this reduction will carry forward into August and may be extended further, according to an energy ministry source cited by the official Saudi Press Agency (SPA).

This extra voluntary cut aims to bolster the cautious measures undertaken by OPEC+ nations to support the balance and stability of the global oil markets, SPA reported. Consequently, the daily production of oil by Saudi Arabia, the world's leading oil exporter, is poised to hover around nine million bpd.

The potential for extension of the cut was pointed out by Saudi Energy Minister Prince Abdulaziz bin Salman when announcing the decision following a meeting of oil producers last month. Earlier in April, a voluntary production cut by over one million bpd was agreed upon by several OPEC+ members. Although this move initially fortified prices, it couldn't secure a sustained recovery.

Saudi Arabia's ambitious reform agenda, aiming to transition its economy away from fossil fuels, hinges significantly on high oil prices. Industry analysts estimate that Saudi Arabia requires oil prices to be at $80 per barrel to balance its budget, a figure that substantially surpasses recent averages.

In parallel, Russia, a member of the OPEC+ alliance along with Saudi Arabia, announced on Monday its decision to voluntarily reduce oil exports by 500,000 barrels per day. "To maintain a balanced oil market, Russia will voluntarily cut its oil supply in August by 500,000 barrels per day," stated Alexander Novak, the Russian Deputy Prime Minister overseeing energy policy. This cutback follows Russia's similar volume reductions in oil production this year in response to Western sanctions related to the conflict in Ukraine.

Oil producers worldwide continue to grapple with the challenges of plummeting prices, high market volatility, lingering impacts from Russia's invasion of Ukraine, and China's faltering economic recovery.