Saudi Arabia will cut output deeply in July as part of an OPEC+ plan to curb supplies into 2024 to support oil prices.

Saudi Arabia’s oil ministry said July output would decline to 9 million barrels per day (bpd) from 10 million in May, the greatest drop in years.

“This is a Saudi lollipop,” Saudi Energy Minister Prince Abdulaziz told a news conference. “Ice the cake.” Always build suspense. We don’t want people to predict us… Stabilize this market”.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and Russia, pumps 40% of the world’s crude. Therefore its policies can affect oil prices.

In April, a surprise supply decrease lifted worldwide benchmark Brent crude by $9, but fears about the global economy and demand have since pushed prices down.

Brent closed Friday at $76. Saudi Arabia is the only OPEC+ member with enough spare capacity and storage to adjust output.

In 2020, the producers lowered output to reduce surplus supply, undermining the market.

OPEC+ has cut 3.66 million bpd, 3.6% of world demand, including 2 million agreed last year and 1.66 million voluntary cutbacks in April.

OPEC+ extended the restrictions through 2024 on Sunday in a broader output strategy accord reached after seven hours of discussions.

Since Russia invaded Ukraine in February last year, western nations have accused OPEC of manipulating oil prices and hurting the global economy. The West also claims OPEC supports Russia.

OPEC sources say the West’s money-printing over the previous decade has caused inflation and prompted oil-producing nations to intervene to safeguard the value of their main export.

Analysts said Sunday’s OPEC+ decision showed the group’s willingness to sustain prices and fight speculators.

“It is a clear signal to the market that OPEC+ is willing to put and defend a price floor,” said Energy Aspects co-founder Amrita Sen.

Gary Ross, the proprietor of Black Gold Investors and veteran OPEC watcher, said, “The Saudis have made good on their threats to speculators and they clearly want higher oil prices.”

UBS analyst Giovanni Staunovo projected a solid start on Monday after the market closed on Sunday.

On Sunday, OPEC+ extended its 3.66 million bpd cuts and reduced its production targets from January 2024 to 40.46 million bpd.

The firm cut Russia, Nigeria, and Angola targets to match current production. Thus many of these reductions will not be realized.

The UAE was authorized to increase output targets by 0.2 million bpd to 3.22 million.