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Russia and Saudi Arabia announce oil production cut of 1.5 million bpd as OPEC predicts oil demand will grow till 2045
Saudi Energy Minister Prince Abdulaziz bin Salman said on Wednesday that the latest move to extend oil production cuts by the world’s biggest exporters, Saudi Arabia and Russia, was evidence of strong teamwork between Riyadh and Moscow,
Saudi Arabia said on Monday it would extend its voluntary crude output cut of one million barrels per day for another month to include August, while Russia simultaneously announced a 500,000 barrel-per-day decline in exports next month. The cuts will amount to 1.5% of global supply.
“It is quite telling seeing us on Monday coming out with not only our [oil production cut] extension… but also with validation from the Russian side,” he told a meeting of oil industry CEOs with ministers at the OPEC+ International Seminar in Vienna.
Prince Abdulaziz said there was deep cooperation between Saudi Arabia and Russia as part of the OPEC+ alliance, and pledged to do “whatever necessary” to support the oil market.
“In the last move this week, yes, we are all continuing with our voluntary cut, but again, part of what we have had done with our colleagues from Russia was also to mitigate the cynical side of spectators about what was going on with Saudi Arabia and Russia,” he said.
The Saudi energy minister hailed Russia’s oil production cut, describing it as meaningful as it affects exports, and noted that the move had been voluntary, not imposed.
“We worked with seven independent entities to review Russia’s numbers, and they stood by the review. It is a voluntary cut; it was not mandatory, which shows their commitment,” the Saudi minister said.
On Wednesday, benchmark Brent futures almost flat at $76.30 per barrel as of 1440 GMT, remaining below the $80-$100 per barrel that most OPEC nations need to balance their budgets.
The world’s appetite for oil will continue rising to hit 110 million barrels a day by 2045, the oil cartel predicted a week ago. The fossil fuel will still comprise about 29% of the global energy mix by then, the alliance claimed.
“Oil is irreplaceable for the foreseeable future,” OPEC Secretary General Haitham Al Ghais stated while addressing the inaugural Energy Asia conference in the Malaysian capital of Kuala Lumpur.
According to Al Ghais, underinvestment in the oil industry will only challenge the viability of current energy systems and lead to an “energy chaos.”
He predicted that from now until 2030 another half a billion people will move to cities across the world as the global economy continues to expand, which means the world will need more oil.
Al Ghais acknowledged that renewables will play a greater role in the world’s energy mix going forward, and asserted that some OPEC member states have been “already investing significantly” in the sector.
“We see global energy demand increasing by 23% through 2045,” he said, adding: “Gas hydro, nuclear hydrogen and biomass will expand. But it is clear that oil remains an integral part of the mix.”
Earlier in June, the International Energy Agency (IEA) warned of an oil shortage, saying global demand would rise by 6% between 2022 and 2028, driven by the petrochemical and aviation sectors. The report said around three-quarters of the increase in the six-year period to 2028 would come from Asia, with India surpassing China as the main source of growth by 2027.
The latest round of crude oil output cuts comes on top of voluntary reductions of 1.66 million barrels per day that some OPEC+ members had first declared in April, and then agreed to extend until the end of 2024.
OPEC+, a group comprising the Organization of the Petroleum Exporting Countries and allies including Russia that pumps around 40% of the world’s crude, has been cutting oil output since November 2022.
Source OPEC/RT/Reuters
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