OPEC+ Meet To Reduce Oil Production
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Countries that produce oil made a deal to keep cutting production to try and make prices stronger.
Saudi Arabia will reduce output by one million bpd in July. Opec+ will decrease targets by 1.4 million bdp starting in 2024.
The group Opec+ has a big role in crude oil worldwide. They can change the oil prices a lot.
Oil-rich nations led by Russia had a seven hour-long meeting. This happened when the prices of oil were falling and there was too much of it available.
Opec+ reduced production by 3.66 million bpd since October 2022, says Russian Deputy Prime Minister Alexander Novak.
Opec+ means Organization of Petroleum Exporting Countries allies. They agreed to cut production by 2 million bpd, which is 2% of global demand.
Mr. Novak said the deal has been extended until the end of 2024 after discussions.
In April, OPEC agreed to cut oil production by 1.6 million barrels per day (bpd). The cut started in May but only caused a short increase in prices. The increase did not last long and oil prices did not fully recover.
Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, announced on Sunday that the current one million bpd cut could continue past July. This move is aimed at keeping the market stable. The Prince referred to it as a "Saudi lollipop."
On Monday morning, oil prices went up by $2 per barrel in Asian markets. The Brent crude futures reached $78.42 per barrel.
Sameer Hashmi's Analysis Of Middle East Business
People thought Opec+ would make production cuts to help prices before their meeting. Most members didn't want to do this because it could hurt their economy. They need oil revenues.
Saudi Arabia decided to decrease their daily oil production by one million barrels, which was surprising but also expected. They are the biggest oil exporter and have the ability to decrease output.
Riyadh needs crude to cost above $80 per barrel to balance out. Saudis want high prices so they can pay for big projects. Crown Prince Mohammed bin Salman leads the projects to move the kingdom's economy from just oil.
Saudi Arabia's decision highlights the unsure future of fuel demand. This is due to fears of a recession in the US and Europe, which will cause crude oil prices to drop even further.
The price of oil is going down and there is a lot of instability in the market since Russia went into Ukraine. Producers are struggling to deal with these challenges.
Opec got blamed by the West. They said Opec messed with prices. They think Opec hurt the world's economy with expensive energy. West also thinks Opec took Russia's side. Russia got in trouble because of Ukraine.
Opec insiders claim that the West's monetary policy caused inflation. This led oil-producing nations to act. They needed to maintain the value of their main export.
