In a move to support oil prices, Saudi Arabia said Thursday it would extend its decision to cut oil production by one million barrels a day for another month, to September.
Oil prices have recovered strongly in recent weeks partly because of smaller stockpiles of fuel in the United States, but China’s tepid economic recovery has kept oil prices under pressure for most of the year. Saudi leaders need oil prices to stay high because the money from energy sales pays for government spending and ambitious plans to diversify the country’s economy beyond petroleum and petroleum products.
The global Brent oil price, which climbed by 16 percent in July, rose less than 1 percent, to about $84 a barrel, after the Saudi announcement on Thursday. The Saudi move could put additional pressure on U.S. gasoline prices, which have surged over the last month. The national average price for a regular gallon of gasoline on Thursday was $3.82, compared with $3.54 a month ago. The price a year ago was $4.16 a gallon, according to the AAA motor club.
Russia, which had agreed last month to reduce production by 500,000 barrels a day, will cut 300,000 barrels a day in September, the country’s deputy prime minister, Alexander Novak, said after the Saudi announcement, according to Reuters. Russia has been selling the bulk of its oil to China and India at discounted prices to fund its war in Ukraine.
Saudi Arabia will produce 9 million barrels a day in September, according to its energy ministry, approximately 9 percent of global production. It has reduced production by close to two million barrels a day since the third quarter of last year. Saudi Arabia is a major supplier of oil to Asia. Europe is also buying more Saudi crude, since the Russian invasion of Ukraine last year curtailed energy ties with Moscow.
With American production at record levels, relatively little Saudi oil is imported into the United States. But the Biden administration has been pressing Saudi Arabia to keep production high because oil prices are set on the global market and are the major factor in determining U.S. gasoline prices.
Russia and Saudi Arabia are the leading members of OPEC Plus, the group of major oil producing nations. Several countries that are not members of the group, including Guyana and Brazil, have been ramping up supplies.