Production cuts from major oil exporters have sent global oil prices over $90 a barrel for the first time in 2023.
The two principal nations in the OPEC+ group — Saudi Arabia and Russia — extended plans to pump less oil to the end of the year, in a move likely to stoke international political controversy as the world grapples with elevated inflation, partly caused by high energy prices.
Riyadh retained the cuts despite pressure from the United States to increase production. The voluntary Saudi cut of 1 million barrels a day started in July and will now run until the end of December.
It means production in the Kingdom will fall to around 9 million barrels a day. That is a drop of about a quarter from the maximum capacity of the world’s biggest oil exporter at about 12 million barrels daily. The cut will be reviewed each month, as part of the ongoing process at the OPEC+ group of oil exporters to keep the oil market in balance.
Moscow’s parallel voluntary cut, of 300,000 barrels a day, will also run until the end of December. Both sets of reductions are described as voluntary because they are over and above OPEC+ agreed cuts.
The production cuts are likely to strain relations with the White House. Washington has criticised Saudi Arabia's close cooperation with Russia, especially after Vladimir Putin invaded Ukraine and his weaponisation of natural gas supplies to Europe.
Al Majalla now puts the cuts in context and looks at the broader reasons behind them and the debate surrounding them.
China — the world’s second-biggest economy and manufacturing powerhouse — is slowing down, raising warning flags over oil demand.
According to a Reuters survey, China’s imports dropped by over 12% in July and exports fell by over 14% in the month. That means the slowdown is deepening from levels revealed in official data from the world’s biggest importer of oil products.
And that means the prices for oil and derivatives in Asia are falling amid the easing demand from a slowing economy. Analysts expect China’s growth rate to continue to cool.