Saudi Arabia and Russia are extending cuts to the amount of oil they pump to the world in a bid to prop up prices, showing how two of the world’s largest oil producers are scrambling to boost income from the fossil fuel even as demand has weakened with the economy.
The decision gave a slight boost to oil prices on Monday and comes after the Saudis announced a large cut in output for July at the latest meeting of the Opec+ coalition of oil producers — raising concerns that petrol prices could start increasing again.
The Saudi Energy Ministry said it would extend July’s cut of one million barrels per day through August to support “the stability and balance of oil markets”.
That will keep the Gulf nation’s output at nine million barrels per day.
Meanwhile, Russian Deputy Prime Minister Alexander Novak said his country will cut production by an additional 500,000 barrels a day in August, according to Russian news reports.
The voluntary reductions come on top of earlier cuts that the Opec oil cartel, led by Saudi Arabia, and allied producers, led by Russia, agreed to extend through next year.
But they have given little lasting boost to oil prices, helping drivers filling their tanks more affordably during the busy summer travel season and providing consumers worldwide some relief from inflation.
Benchmark US crude picked up 77 cents Monday to 71.41 dollars a barrel, while international benchmark Brent crude gained 70 cents to 76.11 dollars. Both later erased some of those gains.
US crude has been depressed for some time and rose above 70 dollars per barrel for the first time in five weeks on Friday.
That the Saudis felt another cut was necessary underlines the uncertain outlook for fuel demand in the months ahead even as travel picks up.
There are concerns about economic weakness in the US and Europe, while China’s rebound from Covid-19 restrictions has not been as strong as many had hoped.
The Saudis need sustained high oil revenue to fund ambitious development projects aimed at diversifying the country’s economy, while Russia is looking to pad its profits to pay for its war against Ukraine.
Western sanctions mean Moscow is forced to sell its oil at a discount to countries like China and India.
