Saudi Energy Minister Abdulaziz bin Salman arrived for the meeting in Vienna on Sunday.LEONHARD FOEGER (REUTERS)
The world's largest crude exporter and de facto leader of the expanded version of the Organization of the Petroleum Exporting Countries (OPEC+) is making a move. Saudi Arabia has announced on Sunday that it will withdraw from the market one million barrels per day – 1% of global production and about 10% of its pumps – to try to stabilize the price of this raw material, still dominant in the global energy matrix and essential for its own economic health. It is the biggest Saudi cut in two years.
The move will increase the quota of the United Arab Emirates, which opposed a widespread production cut and has less room for maneuver, aims to bring the price of crude back above $ 80 per barrel, the threshold that – according to the International Monetary Fund (IMF) – the Desert Kingdom needs to stabilize its budget and finance its megalomaniac investments. At the close of Friday, Brent crude (the benchmark in Europe) was trading at 76 dollars, far from the 100 of a year ago.
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"We will reduce [our production] by one million barrels a day from July," Saudi Energy Minister Abdelaziz bin Salman said after the cartel meeting in Vienna. The Saudi delegation has made an effort to make it clear that this is a "voluntary" cut and that it is added to those already announced in recent months, for a total of 3.6 million barrels and maturing at the end of the year. "We wanted to put the icing on the cake, always with suspense: we do not want our movements to be predicted," Bin Salman added. "You have to stabilize the market."
Riyadh has been the only one of the 23 OPEC+ countries (13 from the original OPEC, Russia and nine other additional partners) that has shown itself on Sunday willing to close the oil tap, a path it will take for the third time in less than 12 months. The rest of its partners, with much less room for action – both in terms of production cost and total income – has limited itself to extending the current production cuts until the end of 2024 to try to cope with a global demand that does not rise at the expected pace.
Russia, the world's second-largest oil exporter, will not deepen the cuts but is committed to extending previously agreed limits. "We will extend our voluntary cuts of 500,000 barrels until the end of 2024 as a precautionary measure in coordination with OPEC+ countries," said Alexander Novak, deputy prime minister of the Eurasian country and former energy minister. Moscow, like Riyadh, needs the price of oil to rise to finance its costly military campaign in Ukraine.
Although the influence of OPEC+ on the entire oil market has fallen in recent times, these countries still account for approximately 40% of the crude oil that is put on the market every day around the world. The next meeting of the expanded poster is set for the end of November. In the oil world it is assumed that, if the market does not respond to this new cut, the partners will convene an emergency meeting to try to reverse the tables.
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