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Oil prices up as Saudi extends output cut

Saudi minister of energy Prince Abdulaziz bin Salman Al-Saud Reuters/Leonhard Foeger
Saudi Arabia's minister of energy Prince Abdulaziz bin Salman Al-Saud arrives for an Opec meeting in Vienna last month
  • Move intended to support ‘stability and balance of oil markets’
  • Russia to cut August exports by 500,000 bpd
  • Oil prices increase 1.6% following announcement

Saudi Arabia will extend its voluntary oil output cut of one million barrels per day (bpd) into August, pushing up the price of oil.

Originally implemented at the start of this month, the cut will see production by the major oil producer stand at approximately 9 million bpd throughout the next two months.

These can be extended further, according to a report from the state-run Saudi Press Agency.

“This additional voluntary cut comes to reinforce the precautionary efforts made by Opec+ countries with the aim of supporting the stability and balance of oil markets,” the report said, quoting an official source from the Ministry of Energy.

It is in addition to the voluntary cut previously announced by the kingdom in April alongside other Opec+ members, which extends until the end of December 2024.

Opec+, which groups the Organization of the Petroleum Exporting Countries (Opec) and allies under the de facto leadership of Saudi Arabia, pumps around 40 percent of the world’s crude oil.

Shortly after the Saudi announcement on Monday Russia revealed that it had agreed to slash its exports by 500,000 bpd next month.

“Within the efforts to ensure the oil market remains balanced, Russia will voluntarily reduce its oil supply in the month of August by 500,000 barrels per day by cutting its exports by that quantity to global markets,” deputy prime minister Alexander Novak said.

Oil prices rose on the news, with brent oil up by 1.6 percent to $76.60 a barrel.

Opec+ put in place cuts of 3.66 million bpd last month, amounting to 3.6 percent of global demand.

At that time the UAE was allowed to raise output targets by around 200,000 bpd to 3.22 million bpd.

Opec+ is hosting a conference later this week in Vienna expected to be attended by prominent oil ministers and CEOs.