Key Points

  • Saudi Arabia has pledged further voluntary oil production cuts, increasing oil prices.
  • According to a statement by the energy minister, the Kingdom is set to decline its production by a million to 9 million barrels a day.
  • OPEC+ contributes around 40% of the world’s oil supply and plans to increase its oil production cuts over time.

Oil prices to keep increasing as production cuts increase

Oil prices rose on June 5, 2023, following news that Saudi Arabia had decided to slash their daily production by 1 million barrels. However, the Organization of the Petroleum Exporting Countries and its partners (OPEC+) have not changed their planned oil production cuts for the remainder of the year.

The world’s leading oil exporter Saudi Arabia has said that the new production plans will take effect in July. Following the release of the information on Sunday, International benchmark Brent crude futures traded a barrel at $77.34 (1.6% higher) at 11.15 a.m. London time and the Intermediate futures stood at $73.01, over 1.7% higher.

Several oil producers had revealed a combined 1.66 million barrels per day cut by the end of the year. This report shook the market a bit, but it didn’t expect Saudi Arabia to be cutting its production by a whole million barrels in a day so soon.

Whether the other countries will choose to reduce their oil production by higher than the set limit by OPEC+ remains to be seen. However, you can expect drastic changes in oil prices throughout the year. Keep watching Fintech Express for updates on this and other finance-related stories.