Yesterday, Saudi Arabia extended its 1 million barrel per day voluntary crude oil production cut until the end of the year, according to the state-owned Saudi Press Agency.
The reduction will put Saudi crude output near 9 million barrels per day over October, November and December, and will be reviewed on a monthly basis.
The 1 million barrel per day reduction was first applied in July. The cut adds to 1.66 million barrels per day of other voluntary crude output declines that some members of OPEC have put in place until the end of 2024.
Related: OPEC+ Announces Surprise Crude Oil Cut
Fellow oil producer Russia — which leads the contingent that joins OPEC nations in the OPEC+ coalition — also pledged to voluntarily reduce exports by 500,000 barrels per day in August and 300,000 barrels per day in September, which will likely remain in place until the end of December 2023, reviewed on a monthly basis.
The cuts are described as “voluntary” because they are outside of OPEC+’s official policy, which commits every nonexempt member to a share of production quotas.
The announcements from Saudi Arabia and Russia caused a jump in the price of crude yesterday, reinvigorating inflation worries globally, causing oil to move to its highest level since November 2022.
Investors are concerned that elevated energy costs could complicate the work of the Federal Reserve as it brings down inflation with higher interest rates.
“The downbeat mood on the markets is continuing,” said Susannah Streeter for Barron’s. “Energy prices are big inflationary drivers, and just at the time when the price spiral appears to be moving more obediently downwards, high crude prices could cause upset.”
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