Saudi Arabia and other oil giants announce surprise production cuts
- The cuts, totalling 1.15 million barrels per day from May until the end of the year, could raise prices worldwide
- Higher oil prices would help fill Russian President Vladimir Putin’s coffers and further strain ties with the US
The Saudi Energy Ministry said its own reduction of 500,000 barrels per day would be made in coordination with some Opec and non-Opec members, without naming them. The cuts are in addition to a reduction announced last October that infuriated the Biden administration.
The ministry described the move as a “precautionary measure” aimed at stabilising the oil market. The cuts represent less than 5 per cent of Saudi Arabia’s average production of 11.5 million barrels per day in 2022.
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Since those cuts, oil prices have actually trended down. Brent crude, a global benchmark, was trading at around US$80 a barrel at the end of last week, down from around US$95 a barrel in early October, when the earlier cuts were agreed.
Kristian Coates Ulrichsen, a Gulf expert at Rice University’s Baker Institute for Public Policy, said the Saudis are determined to keep oil prices high enough to fund a raft of ambitious mega-projects linked to Crown Prince Mohammed bin Salman’s Vision 2030 plan to overhaul the economy.
“This domestic interest takes precedence in Saudi decision-making over relationships with international partners and is likely to remain a point of friction in US-Saudi relations for the foreseeable future, even without taking into account the Russian dimension,” he said.
Saudi Arabia’s state-run oil giant Aramco recently announced record profits of US$161 billion from last year. Profits rose 46.5 per cent when compared with the company’s 2021 results of US$110 billion. Aramco said it hoped to boost production to 13 million barrels a day by 2027.