Last night (5 Sep), Russia and Saudi Arabia announced their extension on oil production cuts. The US crude oil futures spiked to $88 for WTI and $91 per barrel for Brent, both dropped by $1 each this morning.
The Saudi’s energy ministry official confirmed the voluntary 1 million barrel per day cut will be extended for another three months until the end of this year, according to SPA, the state news agency.
Alexander Novak, Russia’s Deputy Prime Minister, said Russia will voluntarily reduce its oil exports by 0.3 million barrels per day by the end of December 2023 as well.
Both countries will continue to review the market condition monthly. There’ll be a possibility of either further cut or raise in the production. These additional cuts are on top of the OPEC cut agreement earlier this year in April which extended to the end of 2024.
Furthermore, global oil demand will surpass 2.7 million barrels per day in the next quarter, according to Rystad Energy consultant.
The crude oil price has come back to visit this level again since November 2022. At the beginning of last year, the oil price peak was over $120 per barrel which is 33% more than the current price. That was also when the inflation was at its hottest as well. In contrast, the oil price was below $20 per barrel when the pandemic lockdown was announced.
Over two decades, the crude oil price is usually in the range between $40 to $110 per barrel. Depending on OPEC production and world situation, the oil price could double, triple or cut by half within a year or two. And since oil price always impacts the transportation cost of all goods, the volatile price would be a major concern to the future of the world economy.
