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Oil prices rose after the OPEC government Saudi Arabia’s decision to cut production by another million barrels per day.

On Sunday, the Organization of the Petroleum Exporting Countries and its partners (known as OPEC+) made no changes to planned oil production cuts for the rest of the year. However, the world’s largest oil exporter, Saudi Arabia, has announced another voluntary production cut to be implemented from July.

Kingdom production will drop to 9 million barrels per day from around 10 million barrels in May, the Saudi Energy Ministry said in a statement.

Both benchmarks traded higher on Monday.

International benchmark Brent Crude futures traded at $76.57 a barrel, up 0.6%, while the U.S. West Texas Intermediate futures were at $72.03, up more than 0.4%.

OPEC+ pumps around 40% of the world’s oil, and political decisions can have a significant impact on prices.

On April 3, several oil cartel producers hada total of 1.66 million barrels per day production is declining until the end of this year. And many market watchers, including analysts at Goldman Sachs, expected the alliance to keep output unchanged this time around.

This weekend marked the “ultimate failure of Saudi Arabia” to rally all OPEC+ members to do “what was required to bring better prices to the market.

Ed Morse

Global Head of Commodity Research and Managing Director of Citi

“The market was not expecting much from Saudi Arabia’s decision to unilaterally cut production by 1 million barrels per day,” Bob McNally, president of analyst firm Rapidan Energy, told CNBC in an email after the decision.

“Once again, Saudi Arabia has shown that it is willing to act unilaterally to stabilize oil prices,” McNally said, citing the example of January 2021, when the oil titan unilaterally cut production by 1 million barrels per day.

“We see large global deficits materializing in the second half of 2023 and oil prices crossing $100 next year,” he added.

Similarly, Kang Wu, head of global demand and Asia analysis at S&P Global Commodity Insights, estimates that a significant increase in global oil demand in the Northern Hemisphere summer season will lead to a depletion of oil stocks and “support higher oil prices” in the coming period. months.

RBC Capital Markets managing director Helima Croft noted that while some market participants will focus on the fact that Saudi Arabia cut its output independently, its actions add to the integrity of the cuts.

“The fact that [Saudi Arabia] He is willing to carry it himself, which adds to the credibility of the cut and signals real barrels leaving the market,” Croft wrote in a research note. Others, however, did not view the kingdom’s move with such optimism.

‘Ultimate Failure’

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