Saudi Arabia Expected to Extend Voluntary Oil Cut for September, Analysts Say

Saudi Arabia is predicted to lengthen a voluntary oil output reduce of 1 million barrels per day for one other month to embrace September, 5 analysts mentioned, to present extra assist for the oil market.

In June, OPEC+ agreed on a broad deal to restrict oil provide into 2024 and Saudi Arabia pledged a further voluntary reduce for July. On July 3, Saudi Arabia mentioned it will lengthen the reduce for one other month to embrace August, including that it might be prolonged additional.

Oil costs have discovered some assist from proof of tightening provides and financial stimulus in China. Brent crude was buying and selling at over $84 a barrel on Friday, after hitting its highest degree since April on Thursday.

“Given the tentative recovery, my guess is they continue the cut for one more month and then phase it out over three months — similar to what Saudi did in 2021,” mentioned Gary Ross, founding father of Black Gold Investors and a veteran OPEC watcher.

The Saudi Energy Ministry didn’t reply to a request for remark.

In the newest feedback from an OPEC member in the marketplace, the power minister for the United Arab Emirates informed Reuters on July 21 that present OPEC+ actions are enough for now and the group is “only a phone call away” if any additional steps are wanted.

OPEC+, which teams the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps round 40% of the world’s crude. The group has been limiting provide since late 2022 to assist the market.

Another analyst, Giovanni Staunovo of UBS, additionally drew a parallel with Saudi actions to bolster the market two years in the past.

“Looking at what they did in 2021, the full 1 million bpd cut was in place for three months, before scaling it down. So based on that they might extend it for another month,” he mentioned on July 25.

“But there are many moving parts at present, which might still impact the decision over the coming days.”

The Saudi voluntary reduce announcement for July got here as a shock on the June OPEC+ assembly, the place Riyadh shared little or no element on the measure with different delegations prior to the assembly, OPEC+ sources mentioned.

Saudi Energy Minister Prince Abdulaziz bin Salman mentioned in July that OPEC+ would “continue the effort at surprising markets” and do “whatever is necessary.”

Three different analysts — Tamas Varga of oil dealer PVM, Warren Patterson of ING and Macquarie analyst Vikas Dwivedi — additionally mentioned they thought the reduce would most likely be prolonged for September.

“I think that Saudi cuts will remain in place throughout September,” Varga mentioned. “Keeping these cuts in place … will I believe provide a better idea on how to manage the supply side of the oil equation in the fourth quarter of the year.”