Saudi Arabia will continue its unilateral production cutback of 1 million barrels a day until December. Russia will extend its output cuts at the same time.
Brent oil soared past $US90 a barrel for the first time since November as the largest OPEC+ producers extended their supply cuts to year-end.
“Today’s development is a stark reminder to short sellers to not position against the central bank of oil,” RBC Capital Markets’ Michael Tran said. “The Saudis would rather overtighten, rather than course correct later.”Russia’s Deputy Prime Minister Alexander Novak announced in a separate statement that his country’s export reduction of 300,000 barrels a day will be extended for the same duration — the latest sign that Riyadh and Moscow are in lockstep on oil policy.
The price increase will likely spur displeasure in the US, where the Biden administration seeks to stave off the threat of $US4-a-gallon gasoline. A renewed inflationary spike would squeeze consumers and risks derailing efforts by central bankers across the globe to quell inflation. Fuels like gasoline and diesel are already trading far in excess of headline crude prices.The Saudis’ move exceeded market expectations.
The kingdom first introduced its additional supply cut in July, deepening reductions already made with partners in the OPEC+ alliance. With most members of the coalition already suffering output losses due to underinvestment and operational disruptions, Riyadh opted to make a largely solo initiative to support prices.
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