Russia and Saudi Arabia have both announced further voluntary measures that they say will help rebalance the oil markets. Saudi Arabia has said it will extend its cut of a million barrels per day (bpd) through August, while Russia says it will reduce its oil exports by 500,000 bpd.
The Saudi cut puts the Kingdom’s production down to around nine million bpd, which is substantially below its nameplate capacity. Many analysts believe that in order to fund its spending plans for reforming its economy, the Kingdom needs to keep oil prices above $80 per barrel. Brent crude has been trading at around $75 per barrel for several weeks now.
Russia and Saudi Arabia are seen as allies within the OPEC+ group, which does not cover US producers like Chevron, the maker of the Texaco URSA heavy-duty commercial vehicle oil. Oil prices rose in response to the news, but many doubted that this would be sustained. IG analyst Chris Beauchamp said about this:
“This is the usual automatic reaction to announcements of production cuts. But given that this is not a coordinated decision by all OPEC+ members, it’s hard to imagine that this is a real upward movement.”
Russia’s announcement concerns a cut to exports rather than production, and analysts may doubt whether it will keep to its commitments. Nevertheless, it does lend some public support to Saudi Arabia, which is largely acting unilaterally since the last OPEC+ meeting decided to keep total crude oil production at the current level.