Saudi Arabia and Russia, in coordinated statements, said on Tuesday they would extend their cuts in oil supplies through for the rest of 2023.
The moves helped push up oil prices, which have been on the rise in recent weeks. Futures for Brent crude, the international benchmark, breached $90 a barrel for the first time since June 2022. West Texas Intermediate crude, the U.S. benchmark, reached $87.75.
The cuts — one million barrels a day of output by Saudi Arabia, and 300,000 barrels a day of exports by Russia — are intended to support oil prices. The Saudis first announced voluntary cuts early in the summer, and they have until now been extended on a month-to-month basis.
The move on Tuesday to extend them by three months surprised some analysts, and appeared to reflect a greater determination to keep a close rein on supplies — with the likely result of raising prices.
Together, the cuts, intended as a show of unity among large exporters, could amount to more than 1 percent of global supplies, although Russia’s contribution to the reduction may be difficult to track.
The Saudis also left open the possibility of increases, saying there would be monthly reviews to consider “deepening the cut or increasing production,” in a statement carried by the Saudi Press Agency.
The Saudis, analysts say, favor a robust market for what remains their chief source of income, and appear willing to risk alienating customers, especially those in developing economies, as well as allies like the United States to achieve their aims.
The Saudis “see it as their job to keep the market tight,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.
Prince Abdulaziz bin Salman, the Saudi oil minister, has been the public face of this more aggressive policy.
Earlier this year, the markets largely shrugged off the hawkish comments of the oil minister, who is the half brother of Crown Prince Mohammed bin Salman, the kingdom’s chief policymaker. In recent weeks, oil prices have risen as traders shifted from worries about the global economy to concerns about falling levels of oil in tank farms and continued strong demand.
Crude prices have risen more than 20 percent since mid-June. This rise has occurred in the face of continued economic weakness in China, the most important customer for oil exporters, like the Saudis.
Higher prices will be welcomed by Russia and shale drillers in the United States, among others, but they risk complicating efforts by central banks to contain inflation.
Brent crude selling for $90 a barrel or above could also cause added friction between Riyadh and the Biden administration. The White House, though, is focused on efforts to broker diplomatic ties between the Saudis and Israel.,
The cuts mean the Saudis are leaving a substantial amount of oil in the ground. According to the announcement carried by the Saudi Press Agency, the kingdom’s giant oil fields will be producing around nine million barrels of oil a day, nearly two million barrels a day less than a year ago.
The Saudis are also investing billions of dollars to increase the amount of oil that they can, at least theoretically, pump. To maintain the cuts permanently would be self-defeating, but at present the Saudis evidently calculate that they are better off with lower production and higher prices than the reverse.
The prospect of more oil eventually coming onto the market from Saudi Arabia and other elsewhere is likely to continue to figure in traders’ and analysts’ calculations. Some analysts said that the Saudis’ mentioning the possibility of an increase after one of the upcoming monthly reviews was noteworthy.
“Explicit mention adds a bit more weight to the option” of an increase, said analysts at Rapidan Energy Group, a research firm, after the Saudi announcement.
Stanley Reed
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