According to Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman Al-Saud on Monday, the kingdom will match its crude oil output with OPEC+ quota in July. Saudi Arabia has been cutting oil production deeper than its allowance under the deal as an effort to balance the oil market. On Saturday OPEC+ agreed to extend a record 9.7 million bpd, or nearly 10% of global supply curbs through next month.
Saudi Arabia, the UAE, and Kuwait committed to cutting by additional 1.18 million bpd in June, with Saudi Arabia contributing 1 million bpd reduction. The Prince's statement, hence, confirmed that the additional cut would not continue in July. Prince Abdulaziz added that the extra output in July would go into domestic consumption. Saudi Arabia uses crude to generate electricity which demand increases in the summer months.
According to some analysts, Saudi Arabia and Russia intend to boost oil prices to balance their budgets. However, they need to maintain the prices under $50/barrel to avoid US shale producers from increasing output that could threaten their market shares and push prices downward again.
The OPEC+ output reduction is due to end in April 2022, but the curbs will be eased gradually. Under the current agreement signed in April, OPEC+ producers will reduce supply by 7.7 million bpd until the end of this year. The curbs will then be eased to 5.8 million bpd from January 2021 to April 2022.
