Saudi Arabia Extends Oil Output Cuts Through 2025 Amid Market Volatility

Saudi Arabia and allied oil-producing countries extended output cuts through next year to support slack prices. The OPEC+ alliance, including Russia, decided to maintain collective cuts of 2 million barrels per day until Dec 31, 2025. Higher oil prices are needed to fund Saudi economic diversification and aid Russia's war efforts.

Saudi Arabia and its allied oil-producing nations have extended output cuts through next year, aiming to stabilize prices that have remained stagnant despite turmoil in the Middle East and the onset of the summer travel season.

The OPEC+ alliance, which includes the producers cartel and allied countries such as Russia, decided during an online meeting to maintain production levels, encompassing collective cuts of 2 million barrels daily, until December 31, 2025.

The extension is crucial for Saudi Arabia, which seeks higher oil prices to fund Crown Prince Mohammed bin Salman's ambitious plans to diversify the economy away from fossil fuel reliance. Elevated oil prices are also vital for Russia to sustain economic growth amidst its heavy expenditure on the Ukraine conflict.

OPEC+ did not clarify the status of an additional set of voluntary cuts, involving a 2.2 million barrel daily reduction by a smaller group including Saudi Arabia. Analysts predict these unilateral cuts will likely extend beyond their current expiration at the month's end.

International benchmark Brent has hovered between $81 and $83 per barrel in the last month. The ongoing war in Gaza and Houthi rebel attacks in Yemen have not pushed prices closer to the $100 per barrel seen in September 2022. Contributing factors include elevated interest rates, slower than expected economic growth in Europe and China, and rising non-OPEC oil supply, notably from U.S. shale producers.

U.S. motorists have benefited from weaker oil prices, with gasoline prices averaging $3.56 per gallon last week, slightly below the $3.57 from a year ago, and significantly down from the record $5 per gallon in June 2022.

U.S. gas prices are closely tied to the price of crude oil, constituting half the cost of a gallon of gasoline. In Europe, tax rates have a larger impact on fuel prices, thus moderating price volatility.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)