Saudi Arabia Announces Cuts To Oil Production To Boost Prices

REUTERS/Leonhard Foeger

Alyssa Blakemore Contributor
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Saudi Arabia will cut its oil production by 1 million barrels per day in a move to boost oil prices, according to a Sunday announcement.

“This is a Saudi lollipop,” Saudi Energy Minister Prince Abdulaziz said of the decision reported in Reuters.

Riyadh’s voluntary cuts, effective July 2023, fall under a broader plan put in place by the Organization of the Petroleum Exporting Countries and allies (OPEC+), the outlet noted. The Russia-led group settled on a deal to further reduce overall production targets through 2024. The agreement increases the production targets for the United Arab Emirates while lowering those of others, translating into cuts of 1.4 billion barrels per day, according to Reuters.

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) on their headquarters in Vienna, Austria, June 2, 2023. REUTERS/Leonhard Foeger

The new production targets are “much more transparent and much more fair,” Saudi Arabia’s energy minister said, per AP News. Saudi Arabia’s announced cuts reflect uncertainty over fuel demand in the coming months, the outlet said.

At the start of summer travel season, U.S. drivers enjoy a drop in prices at the pump from last season’s average of $4.57, according to AAA statistics cited by the AP. The forthcoming drop in production by the world’s second largest oil producer could mean an increase in gas prices, the outlet suggested. (RELATED: Biden Admin Closes Off More US Lands To Oil And Gas Drilling)

The OPEC member’s Sunday announcement follows a similar one made in April which sent crude oil trading temporarily above $84 a barrel. An increase in oil prices could replenish Saudi coffers for the nation’s costly development plans, but could also drive prices too high and fuel inflation with costly impacts stateside, the AP detailed.