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Russia and Saudi Arabia say they will extend previously announced cuts in oil supply this summer, a move by two major oil producers that could drive global markets higher amid a busy travel season in the U.S. and Europe.
Saudi Arabia will extend a production cut of 1 million barrels per day, which is already in effect for July, through August. The state-run Saudi Press Agency said Monday the cut was made “with the aim of supporting the stability and balance of oil markets.”
Russia quickly followed in Saudi Arabia’s footsteps by saying it would cut oil exports by 500,000 barrels per day in August, according to Reuters. It was not clear whether decreasing exports would also mean less production.
Russia said its reason was to “ensure the oil market remains balanced.”
Each country produces around 10 million barrels per day, meaning Saudi Arabia will decrease to 9 million barrels. Russia, which said earlier this year it would slash output by 500,000 barrels per day from March until year’s end, is producing 9.5 million barrels per day.
Russia is the second largest oil exporter in the world, second only to OPEC leader Saudi Arabia. However, the U.S. and other Western countries no longer import Russian oil over its war against Ukraine.
Russia is a member of OPEC+, which includes 13-member OPEC and other allies like Russia, Azerbaijan and Mexico. The twenty-three countries that comprise the two oil cartels account for roughly 40% of the globe’s daily oil production.
By comparison, the U.S. is currently producing 12.2 million barrels per day, according to the U.S. Energy Information Administration. The country’s domestic production is on pace to break pre-pandemic numbers either later this year or next year.
The U.S. consumed an average of roughly 20 million barrels per day in 2022, compared to global consumption of approximately 100 million barrels.
Oil prices over the past month have held steady, with U.S. benchmark WTI Crude around $70 per barrel and global benchmark Brent Crude around $75 per barrel.
The average price for a gallon of regular gas has also flatlined. The average on Monday was $3.54 per gallon, down two cents from one month ago. This time last year, the average price was $4.81 per gallon.
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