Saudi Arabia has taken unilateral action by lowering the quantity of oil it sells to the world economy after two rounds of supply restrictions by major producing nations in the OPEC+ alliance failed to push oil higher.
At a summit in Vienna, OPEC and other oil-producing nations decided to prolong production curbs until next year, including a 1 million barrels per day cut by Saudi Arabia beginning in July.
The decline in oil prices has reduced gas prices for drivers in the United States and elsewhere. In April, many members of the Organization of the Petroleum Exporting Countries (OPEC) unexpectedly agreed to reduce output by 1.6 million barrels daily.
OPEC+ has reduced output by 4.6 million barrels daily on paper, but several nations cannot meet their quotas, bringing the actual decrease to more than 3.5 million barrels per day.
Reductions at the pump in the United States have dropped to an average of $3.55 a gallon, or by $1.02 compared to last year, just in time for the start of the summer driving season. The twenty nations of Europe that utilize the euro have had their lowest inflation rate since before Russia’s invasion of Ukraine.
To finance its ambitious development programs, Saudi Arabia needs a steady stream of high oil revenues, and the United States has lately announced plans to purchase oil to replenish its Strategic Petroleum Reserve. Nations that produce oil, like Saudi Arabia, need the money for their budgets, but they also need to think about how other countries would react if they had to pay more for their oil.
Russia already sells oil to India, China, and Turkey in addition to its traditional markets, but if crude prices rise beyond the $60/barrel ceiling set by the Group of Seven significant democracies, this expansion of the country’s exports might be hampered. Russia has devised strategies to circumvent the price restriction using so-called “dark fleet” tankers, but doing so isn’t cheap. Russia has created strategies to avoid the price restriction using so-called “dark fleet” tankers, but doing so isn’t cheap.