Saudi Arabia has revealed its plan to reduce oil production by 1 million barrels per day starting in July, with the intention of promoting “stability and balance” in the global oil market. Despite not basing production decisions on crude oil prices, this action is widely perceived as an effort to bolster oil prices amid worldwide economic instability and potential declines in international demand.
The announcement followed an OPEC+ meeting in Vienna, although Saudi Arabia’s additional production cuts are being implemented independently. The country has stated that these reductions will persist for at least one month and may be prolonged.
OPEC+ nations also consented to extend the oil production cuts initially declared in April until the end of 2024. This decision will decrease the volume of crude oil they contribute to the global market by over 1 million barrels per day. Notably, OPEC+ countries account for approximately 40% of the world’s crude oil production.
Several African nations and Russia had been urged to diminish production, while the United Arab Emirates plans to augment its crude output. Worldwide oil production currently hovers around 100 million barrels per day.
According to Saudi Arabia’s Ministry of Energy, the nation will now produce 9 million barrels of crude oil daily, a reduction of 1.5 million barrels per day compared to earlier this year. These cuts coincide with the end of Memorial Day in the United States and the beginning of the bustling summer travel season, during which crude oil prices typically impact gasoline costs.
In the previous summer, President Biden visited Saudi Arabia—a nation he once labeled a “pariah” state—to request increased oil production from its leaders. Contrarily, OPEC+ members announced a 2 million barrels per day cut in October, which the White House deemed “shortsighted.”
To counteract rising gas prices, the Biden administration has been tapping into the Strategic Petroleum Reserve since last year, releasing millions of barrels of oil.