Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud arrives for the 35th OPEC meeting. Credit: JOE CLAMAR/AFP via Getty Images
Saudi Arabia has announced plans to cut oil production by 1 million barrels per day (bpd) as the Kingdom has pledged to do “whatever is necessary” to support the fall in prices.
Oil prices were expected to jump on Monday after the unexpected unilateral decision of the Gulf state.
Saudi Oil Minister Prince Abdulaziz bin Salman said the country would voluntarily cut oil production in an attempt to raise prices after how the OPEC cartel and its allies failed to agree on a collective agreement on cuts.
The action, which takes effect from July, means a reduction in global supply by about 1%.
A further drop in production is likely to increase tensions with Joe Biden, who urged manufacturers to open taps to keep prices low level.
The US President, politically hurt by rising fuel prices, has accused OPEC members of siding with Vladimir Putin by agreeing to cut production. US Secretary of State Anthony Blinken is due to visit Saudi Arabia this week.
The move could also slow inflation in the UK and Europe. Rising prices throughout the economy are closely linked to the cost of energy.
At a press conference in Vienna last night after OPEC+ At the meeting, Prince Abdulaziz suggested that the cuts were a gift to the world, as he called the country's production a “Saudi lollipop”. The oil minister also referred to earlier cuts announced by OPEC in April when he said the Kingdom “wants to cover the cake with ice.”
The unilateral cut comes at the end of a tense meeting marred by disagreements between a group of oil-producing countries.< br />
The Saudis hoped to negotiate a cut of 1 million barrels a day of combined production between OPEC and its allies, sharing the cut among the members. However, due to quarrels over quotas, it was not possible to agree.
Members were forced to deny the existence of tensions within the group. Russian Deputy Prime Minister Alexander Novak said that there was no split with Saudi Arabia, while UAE Energy Minister Suhail Al Mazruel told reporters: “We will always support OPEC and we will always be together.”
Giovanni Staunovo, commodity analyst at UBS, said: “Despite a very long meeting, the group shows that it remains united in its efforts to keep the oil market in balance.” growth in early trading on Monday morning. OPEC+ accounts for just over 40% of global production, and OPEC controls about 80% of reserves.
Saudi Arabia's decision to single-handedly tackle output cuts comes after Prince Abdulaziz told traders who were betting on oil prices, “watch out”.
Oil prices have fallen over the past year despite repeated production cuts. A year ago, Brent oil peaked at $125 a barrel, but on Friday it was trading at just over $76 — below the level when Russia invaded Ukraine last February and below the critical $80 price at which the Saudi government Arabia can finance its expenses.
OPEC+ announced an unexpected cut in oil production by 1 million barrels per day in April, which led to a jump in prices. However, it has since dipped due to concerns about the outlook for the global economy.
Although OPEC and its allies did not agree to further cuts on Sunday, members have pledged to extend April's voluntary cuts until the end of next year.
Most of OPEC+ the group, which includes 13 OPEC members and 10 additional producers, has promised to cut production in 2024. However, the group will meet again in November and plans may change.
This comes after the GMB union accused Labor of creating a “cliff's edge” with plans to ban new North Sea oil and gas production. General Secretary Gary Smith said workers were “very concerned” over proposals to ban new licenses in the North Sea, which the union claims would make the UK more dependent on imports.
Mr Smith told Sky News: “Their policy is going to create a cliff edge with oil and gas production in the North Sea.
“There is a lot of oil and gas in the North Sea, and the alternatives facing the country is that we either oil and gas – take charge of our carbon emissions – or we're going to import more oil and gas.”
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