Saudi Arabia and Russia have jointly agreed to extend their voluntary oil production cuts until the end of the year. Effectively reducing the global oil supply by 1.3 million barrels per day. This decision has led to a sharp increase in energy prices. With benchmark Brent crude surpassing the $90 per barrel mark, a price level not seen since November.
The announcements from Riyadh and Moscow are expected to have various consequences. Including the potential for increased inflation and higher gasoline prices for consumers. Furthermore, it adds a new layer of complexity to Saudi Arabia’s relationship with the United States. President Joe Biden previously cautioned the kingdom about the potential “consequences” of collaborating with Russia on production cuts. It has given Russia’s involvement in the conflict in Ukraine.
Commitment to Market Stability: Saudi Arabia and Russia’s Stance
Saudi Arabia’s official statement, conveyed by the state-run Saudi Press Agency, indicated that the country would continue to monitor market conditions and take additional measures if deemed necessary. The statement emphasized the voluntary nature of the production cut and its alignment with efforts by OPEC+ countries to stabilize and balance global oil markets.
In parallel, Alexander Novak, Russia’s deputy prime minister and former energy minister, confirmed that Russia would maintain its daily production cut of 300,000 barrels. Novak justified this decision as part of the collective efforts of OPEC+ nations to uphold market stability and balance.
Following the announcement, benchmark Brent crude surged above $90 per barrel, breaking away from its previous range of $75 to $85 per barrel, which had persisted since October. Meanwhile, West Texas Intermediate (WTI), a key benchmark for the United States, traded at approximately $87 per barrel.
White House National Security Adviser Jake Sullivan refrained from commenting on the market implications of the decision but noted that U.S. officials maintained regular communication with Saudi Arabia. Sullivan also mentioned that President Biden was prepared to employ various tools at his disposal to support American consumers and ensure a stable supply of energy to global markets while aligning with long-term energy transition goals.
Bob McNally, founder and president of the Washington-based Rapidan Energy Group and a former White House energy adviser, highlighted Saudi Arabia and Russia’s commitment to proactively managing the risk of oil prices declining in challenging economic conditions. This collaborative effort of Saudi and Russia underscores their determination to maintain stability in the oil markets.