OPEC, led by Saudi Arabia, is set to continue its production cut strategy to stabilize global oil markets. A monitoring committee, consisting of key OPEC nations, recommended no changes to the coalition’s supply policy during an online meeting. Saudi Arabia announced that it will extend a 1 million barrels per day (MMbpd) production cut into September and may further deepen the reduction after that to support the oil market. Crude oil prices are trading near a three-month high above $85 a barrel in London, but concerns over China’s economic rebound are clouding the demand outlook.
The committee stated that it will closely assess market conditions and is ready to take additional measures if necessary. However, major consuming nations have criticized the move, arguing that tightening output further could lead to renewed inflation and impact consumers negatively.
Russia, another OPEC member, is also assisting Saudi Arabia by curbing its supplies as pledged. Russia announced that it will continue export restraints into September, albeit slightly tapering them to 300,000 bpd.
The current production cut efforts are primarily led by Saudi Arabia and Russia, as other OPEC nations and partners face limitations in further reducing output due to insufficient investment and political instability.
Defending the oil market with production cuts has been costly for Saudi Arabia, leading the country to slash output to a two-year low near 9 MMbpd. As a result, the International Monetary Fund downgraded the country’s economic growth projections, with Saudi Arabia expected to expand by just 1.9% this year, significantly lower than its performance in 2022.
The Joint Ministerial Monitoring Committee will reconvene on October 4th, and the full 23-nation OPEC alliance is scheduled to meet in late November.