Saudis Looking to Jack Gas Prices

Amid slumping prices, Riyadh will slash oil supply
By Newser Editors and Wire Services
Posted Jun 5, 2023 2:20 AM CDT
This Move by Saudi Arabia Could Mean Higher Gas Prices
The price per gallon of grades of gasoline available are illuminated on the pump at a Shell gas station Friday, May 26, 2023, in Commerce City, Colo.   (AP Photo/David Zalubowski)

Saudi Arabia will reduce how much oil it sends to the global economy, taking a unilateral step to prop up the sagging price of crude after two previous cuts to supply by major producing countries in the OPEC+ alliance failed to push oil higher, the AP reports. The Saudi cut of 1 million barrels per day, to start in July, comes as the other OPEC+ producers agreed in a meeting in Vienna to extend earlier production cuts through next year. Calling the reduction a “lollipop,” Saudi Energy Minister Abdulaziz bin Salman said at a news conference that “we wanted to ice the cake.” He said the cut could be extended and that the group “will do whatever is necessary to bring stability to this market.”

The new cut would likely push up oil prices in the short term, but the impact after that would depend on whether Saudi Arabia decides to extend it, said Jorge Leon, senior vice president of oil markets research at Rystad Energy. The move provides “a price floor because the Saudis can play with the voluntary cut as much as they like,” he said. The slump in oil prices has helped US drivers fill their tanks more cheaply and gave consumers worldwide some relief from inflation. “Gas is not going to become cheaper," Leon said. ”If anything, it will become marginally more expensive.” (More explanation and details here.)

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