Jun 5, 2023 - Energy & Environment

Saudi Arabia keeps oil markets guessing — again

Illustration of an oil barrel on a spring bouncing back and forth.

Illustration: Aïda Amer/Axios

Saudi Arabia helped end a cliffhanger over OPEC+ oil production levels but created fresh suspense — and potentially higher energy prices — in the process.

Driving the news: The kingdom will cut output by 1 million barrels per day in July, and then decide whether to continue with the lower output.

  • That reduction was a key result of Sunday's OPEC+ meeting as the group looks to stem price declines.
  • The end result could translate into higher prices at the pump as the U.S. summer driving season kicks into gear.

Catch up fast: OPEC+ also extended 2023 production cuts announced in April through 2024, while altering some nations' allotments.

  • The intricate outcome followed long and reportedly contentious talks in Vienna.

Why it matters: The Saudi move quickly started reversing the general slide in oil prices in recent weeks, though prices already got a bump last week on the U.S. debt ceiling deal.

  • The global benchmark Brent crude rallied above $75 per barrel early Monday, up nearly 3% from Friday's close.

What we're watching: Prices as well as whether the Saudis, OPEC's most powerful member, will further tighten markets by continuing the reductions.

  • "The pure possibility of the Saudi production cut extending beyond July will limit downside price pressure for the rest of 2023," Rystad Energy analyst Jorge Leon said in a note.

The intrigue: The moves will have some impact on U.S. gasoline prices, which are tethered to global crude prices, as the presidential race heats up.

  • The White House, which didn't respond to Axios' request for comment on Sunday, was furious when OPEC+ unveiled major production cuts last October; the reaction to April's cuts was more subdued.

What's next: The Saudi move comes just before U.S. Secretary of State Antony Blinken visits the kingdom later this week.

  • The cut "really raises the stakes" of the visit, Tom Kloza of the Oil Price Information Service said via Twitter.
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