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Crude oil prices rose by more than 1% in early trade today following the OPEC+ meeting that took place Sunday.
At that meeting, Saudi Arabia said it would voluntarily cut its oil production by another 1 million barrels daily next month in a bid to prop up global oil prices.
Oil prices did initially spike on Sunday, with WTI nearing $74 and Brent climbing toward $78 before both falling back.
One other member of the cartel, the UAE, was allowed to actually increase its output but about 200,000 bpd, while several others got their production quotas adjusted. These were countries that consistently failed to reach their assigned quotas for various reasons, such as Nigeria and Angola.
At the same time, the meeting unsurprisingly agreed to extend current production cuts of 3.66 million bpd until the end of this year and reduce combined production by another 1.4 million bpd from the start of 2024.
“It is a clear signal to the market that OPEC+ is willing to put and defend a price floor,” Energy Aspects’ Amrita Sen told Reuters.
“We want to just ice the cake with what we have done,” the Saudi energy minister said, as quoted by the Financial Times. “We will do whatever is necessary to bring stability to this market.”
He called Saudi Arabia’s additional cut “a Saudi lollipop” for the rest of OPEC+, since thanks to that cut the other members would not have to make deeper cuts to their production.
This cut will bring Saudi output to some 9 million barrels daily, as it comes on top of another voluntary cut of half a million barrels daily, implemented earlier this year.
“It is very low in the context that we are not in a global recession,” UBS commodity analyst Giovanni Staunovo told the FT. “It is a clear signal that they want to achieve, as they say, ‘market stability’.”
