Saudi Arabia shall undertake further voluntary output cuts from July following which its output will decline to 9 million barrels per day from about 10 million barrels in May, Saudi’s energy ministry has said in a statement.

In the previous meeting of the Organization of the Petroleum Exporting Countries (OPEC) on June 4, no changes were made to the planned oil production cuts for the rest of the year. However, the world’s top oil exporter, Saudi Arabia has announced further output cuts which will be implemented from July.

Following the OPEC+ announcement to extend crude oil production cuts through 2024, US Energy Information Administration (EIA) forecast global oil inventories to fall slightly in each of the next five quarters. It expects that these draws will put some upward pressure on crude oil prices, notably in late-2023 and early-2024. Brent crude oil spot price is projected at $79 per barrel for the second half of 2023 and $84/b in 2024.

OPEC+ pumps approximately 40 percent of the world’s crude and policy decisions significantly impact the commodity’s prices.
The global liquids fuels consumption is expected to rise by 1.6 million barrels per day in 2023 from an average of 99.4 million barrels per day last year. EIA expects consumption to grow by an additional 1.7 million barrels per day in 2024. Most of this growth is expected to come from non-OECD countries.

Saudi Aramco believes market fundamentals remain “sound” for the second half of 2023, as demand from emerging markets led by China and India will offset recession risk in developed markets. “Overall, we believe that oil market fundamentals remain generally sound for the rest of the year,” said Amin Nasser, CEO at Saudi Aramco. He added that although China faces economic headwinds, the transport and petrochemical sectors are still showing signs of demand growth.

Oil prices declined towards $74 a barrel on June 30 and were on course for a fourth consecutive quarter of losses amid concerns over sluggish global economic activity and fuel demand. Inflationary pressure, rising interest rates in key economies and a slower than expected recovery in Chinese manufacturing and consumption have weighed on markets in recent months.

But signs of strengthening US economic activity and sharp declines in US oil inventories last week, offered support. Saudi Arabia’s plans to cut output by a further 1 million barrels per day in July in addition to a broader OPEC+ deal to limit supply into 2024 offers further support.
Source: CNBCTV-18