Saudi Arabia and Russia have announced the plan to extend voluntary oil cuts of 1 million barrels per day(mbpd) and 300,000 bpd respectively, to the end of the year, a decision which has therefore pushed price of Brent to above $90 per barrel (as of 6pm on Tuesday) for the first time since November 2022.
The state-owned Saudi Press Agency, earlier on Tuesday revealed the 1 million barrel per day voluntary oil production cut, while Russia’s Deputy Prime Minister Alexander Novak made the announcement on behalf of its country in a statement on Tuesday, both obtained by EnergyDay.
EnergyDay’s check further revealed that Saudi Arabia’s decision to extend its voluntary oil production cut of 1 million barrels per day until the end of the year, will therefore put its crude output near 9 million barrels per day over October, November, and December.
Riyadh’s latest decision will be reviewed on a monthly basis; this is despite agreeing to 1.66 million barrels per day of other voluntary crude output declines that some members of the Organization of Petroleum Exporting Countries (OPEC) have put in place until the end of 2024.
Meanwhile Russia, world’s second largest oil exporter, on its part, also extended its voluntary decision to reduce its oil exports by 300,000 bpd to the end of this year in tandem with Saudi Arabia’s output cut.
The Kremlin had earlier pledged to voluntarily cut its oil production by 500,000 barrels per day in August and also initiated another reduction of 300,000 barrels per day in September, before finally extending its cut to 300,000 barrels per day until the end of December 2023.
“The additional voluntary reduction of oil supplies for export is aimed at strengthening the precautionary measures taken by OPEC+ countries in order to maintain the stability and balance of oil markets.
“The voluntary cuts would be reviewed monthly, “to consider the possibility of deepening the reduction or increasing production, depending on the situation on the world market,” Novak said.
The two major oil producers are making these significant cuts, reinforcing the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.
This is happening despite a rally in the oil market and analyst expectations of tight supply in the fourth quarter.
Oil prices rose sharply following the news, despite steady increases in Iranian and Venezuelan oil exports.
Ofcourse the production cuts by the two oil giants are seen as voluntary because it is completely independent of OPEC+’s official policy, which commits every nonexempt member to a share of production quotas.
Experts believe the United States is not enforcing sanctions as stringent as in previous years, but they shared the views that Saudi Arabia and Russia’s previous production strategy is failing as they do not see China’s crude oil demand rising enough to warrant loosening the reins.
With Brent crude oil price rising above $90 per barrel as of 6 pm on Tuesday, September 8, 2023, Nigeria is expected to benefit from the rising price of crude oil.
According to Mele Kyari, Group Chief Executive Officer, Nigeria’s state oil company NNPCL, the country’s oil and condensates per day output rose to 1.6 million barrels per day in August 2023, up from less than 1 million barrels per day in July 2022.
If the rising crude oil price is sustained, experts revealed that Naira will gain since the external reserve will see more credit alerts, but expressed worry that pump prices of petroleum products will increase.