Crude prices have experienced a significant surge following the decision made by top OPEC+ producers Saudi Arabia and Russia to extend output cuts. This move has led to crude prices soaring to four-month highs, as global markets continue to face tightening.
Despite concerns over the economic headwinds faced by China, the world’s second-largest crude consumer, Saudi Aramco’s CEO, Amin Nasser, remains optimistic about the global oil demand. He anticipates that Chinese oil demand will continue to grow, stating that there is still room for the economy to pick up.
Nasser’s comments come in the wake of China’s second-quarter growth falling short of expectations. The country’s economy grew at an annual pace of 6.3% in April-June, missing the projected figure of over 7%. As a result, top investment banks, including Goldman Sachs and JPMorgan, have adjusted their full-year GDP estimates for China accordingly.
To address the current market situation, Saudi Arabia has decided to extend its voluntary oil output cut of 1 million barrels per day for an additional month. Moreover, the kingdom has hinted at the possibility of extending or even deepening the output cut beyond September. Despite these production adjustments, Nasser reassures that there is still adequate supply to meet customer demands.
In addition to Saudi Arabia’s actions, Russia has announced plans to reduce its exports by 300,000 barrels per day starting in September. This reduction comes after the country had already committed to curbing production by approximately 500,000 barrels per day, or nearly 5% of its output, until the end of the year.
The OPEC+ alliance, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and allied nations like Russia, initially agreed to cut output by roughly 2% of global demand from November 2022 to December 2023. Later, the group decided to implement further cuts to achieve market balance.
As a result of these developments, the crude benchmark Brent reached a trading price of approximately $85 per barrel, while WTI stood at around $81.
It is worth noting that the extension of output cuts by Saudi Arabia and Russia has contributed to the surge in crude prices. These measures aim to tighten global markets further, as the supply reduction continues to have a significant impact. Moreover, Russia’s commitment to reducing exports starting in September adds to the overall efforts to stabilize the market.
Overall, despite concerns over economic headwinds and growth forecasts, the global oil demand remains resilient. The actions taken by major producers like Saudi Arabia and Russia, along with the anticipation of continued growth in Chinese oil demand, indicate optimism for the future of the oil market. However, the market dynamics will continue to evolve, and it remains to be seen how these factors will shape the crude prices in the coming months.
RT Business: https://www.rt.com/business/580931-oil-prices-russia-saudi-arabia/