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Saudi Arabia and Russia say they’ll keep oil production low through 2023

Mitchell Hartman Sep 5, 2023
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Saudi Arabia extended its oil production cuts Tuesday. Above, workers at a Saudi oil processing plant. Fayez Nureldine/AFP via Getty Images

Saudi Arabia and Russia say they’ll keep oil production low through 2023

Mitchell Hartman Sep 5, 2023
Heard on:
Saudi Arabia extended its oil production cuts Tuesday. Above, workers at a Saudi oil processing plant. Fayez Nureldine/AFP via Getty Images
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“Cut the supply to prop up the price” has been the recent strategy of Saudi Arabia and its allies in the oil cartel OPEC+.

​In April, the cartel reduced targets for how much oil its member nations would pump. On Tuesday, the kingdom pledged to stick with production cuts of its own through the end of the year. Russia said it’s keeping production low too.

​The announcement worked: Oil prices jumped more than 1% on Tuesday. Brent crude futures topped $90 a barrel for the first time since November, and West Texas Intermediate was up to around $87 a barrel.

​For comparison, it was down at around $67 a barrel in July.

Two of the world’s biggest oil producers signaling tight supply is likely to keep crude prices high for a while, according to energy analyst Stephen Schork. 

“It’s obviously having a very strong impact on prices today and could be detrimental to global economies if this price rise continues,” he said.

Whether Russia actually will keep some of its oil off the market — as it faces crippling sanctions — is anybody’s guess, said Andrew Gross at AAA.

“Russia makes announcements all the time, but do they follow through? Yeah, because here’s the one thing we know: They need the money,” Gross said. “And how do they make their money? By selling oil and gas.”

Saudi Arabia, though, has a lot more market discipline, noted Schork. He thinks the kingdom is hedging against a slump in global oil demand as China’s growth sputters and the world economy struggles. 

“We’re starting to see now exports, oil from Saudi Arabia going to China, actually falling. Shipments going to other buyers in Asia, falling,” he said.

So the Saudis are being proactive, Schork added — trying to keep global crude prices up. 

Meanwhile, U.S. oil producers are likely to respond in their own way, said Eric Smith at Tulane University’s Energy Institute.

“It will certainly encourage additional drilling,” he said.

Gasoline prices in the U.S. are up about 30 cents a gallon since midsummer, according to AAA — to an average of $3.81 a gallon

Still, “people’s worries over gas prices are nowhere where they were relative to those high-water marks we were seeing last summer,” said Joanne Hsu, director of the University of Michigan consumer surveys.

If you’ll recall, that’s when the national average for a gallon of gas briefly topped $5.

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