The state news agency of Saudi Arabia has cited the country’s energy minister as saying that its voluntary cut in the production of crude oil could be extended or even deepened later in the year if necessary.
The country recently announced that it would be extending its voluntary production cut of a million barrels per day (bpd) to the end of September. This is in addition to another voluntary cut of 500,000 bpd that it announced in April and its obligatory cuts as a participant in the OPEC+ deal. This means the Kingdom is currently limited to pumping no more than 9 million bpd, well below its nameplate capacity of 12 million bpd. JPMorgan’s global head of energy strategy, Christyan Malek, said to the Financial Times about this:
“The market thinks that current Saudi production levels were a hard floor, but they’re indicating output could go lower at least until inventories come down and the market stabilises.”
Saudi Arabia is one of the big three oil producers, while the wider OPEC+ group controls about 40% of the world’s energy production. Nevertheless, other producers often fill the gap left by production cuts, most notably US shale producers like Chevron, the maker of the Texaco Delo commercial vehicle oil.
The news indicates that the Kingdom will do whatever it takes to support oil prices, so its oil revenues can fund projects aimed at transforming its economy, especially as higher interest rates will increase the cost of borrowing for these projects.