Crude oil prices rose on 05/07/23 following the agreement among the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies (OPEC+) to limit supply until 2024 instead of 2023. The announcement of Saudi Arabia’s unilateral and voluntary production cut also contributed to the increase.
Oil appreciates after OPEC+ production cut announcement © Photo by: DR Brent crude prices from the North Sea (a benchmark for Angola’s exports and European imports) increased by 2.21% to $77.78 per barrel, while West Texas Intermediate (WTI), the benchmark for the United States, rose by 2.43% to $73.48 per barrel.
The total volume of supply reduction, unanimously decided, remains at 3.66 million barrels per day, which represents 3.6% of the global total. This includes two million barrels per day agreed upon last year and voluntary cuts of 1.66 million barrels per day agreed upon in April. What changes is the duration of the measure: the cuts were valid until the end of 2023, but on Sunday, the oil organization announced that it will extend these cuts until the end of 2024.
OPEC+ maintains production, but Saudi Arabia withdraws an additional one million barrels per day from the supply. “It is a clear signal to the market that OPEC+ is willing to enforce and defend a minimum price,” said one of the founders of the think-tank Energy Aspects, Amrita Sen, to Reuters.
Furthermore, Saudi Arabia also announced that it will cut its production voluntarily and unilaterally. The Saudi Ministry of Energy stated that the country’s production will decrease to nine million barrels per day in July, down from around 10 million barrels per day in May, marking the largest reduction in years.
Sunday’s meeting lasted seven hours, longer than usual, due to three OPEC countries insisting on asserting their demands.
