Saudi Arabia and Russia have agreed to extend their voluntary production cuts of 1.3 million barrels per day (bpd) through to December. The announcement on Tuesday pushed benchmark Brent crude above $90 a barrel in trading.
The joint announcement comes after a series of production cuts this year as the major exporters seek to stabilise global prices. Russia will continue its 300,000 bpd production cut while Saudi Arabia will cut one million bpd.
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The additional cuts could increase global inflation, energy and petrol prices. They could also contribute to ongoing geopolitical tension between the US and Saudi Arabia.
In response to oil production cuts announced by the Organisation of Petroleum Exporting Countries (OPEC+) last year, US President Biden warned that there would be unspecified “consequences” for Saudi Arabia partnering with Russia. The two nations lead the production cuts despite objections from Washington.
Raising petrol prices could have consequences for Biden during the 2024 elections as fuel prices remain a key issue for US voters. According to the White House, raising output is necessary to secure lower energy costs.
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Last year, Biden made a state visit to OPEC+ leader Saudi Arabia, attempting to secure higher production. Instead, OPEC+ announced production decreases in October, followed by additional unexpected cuts in April 2023 which shocked the market. The April cuts will extend until the end of 2024.
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By GlobalDataAccording to the joint announcement, Saudi Arabia and Russia will review the cuts monthly and consider either deepening the reduction or increasing production.
According to the state-run Saudi Press Agency, the cuts are “aimed at strengthening the precautionary measures taken by OPEC+ countries in order to maintain stability and balance of oil markets”.
The announcement comes despite predictions of tight supply from analysts for the fourth quarter of the year.
The extension of voluntary cuts allows Russia to continue oil trading above the price cap imposed by the EU which seeks to limit Moscow’s income and ability to finance its ongoing war against Ukraine.
