Saudi Arabia to end voluntary cuts on top of Opec+ pact, oil prices slip

DUBAI/LONDON/MOSCOW: Saudi Arabia will boost output in July to match its output Opec quota while ending voluntary deeper cuts as it sees need for more oil at home amid signs of global demand recovery, the Saudi energy minister said today.

For June, Saudi Arabia, Kuwait and the United Arab Emirates (UAE) had pledged to cut by 1.18 million bpd on top of that, with Riyadh forfeiting an extra 1 million bpd.

Saudi Energy Minister Prince Abdulaziz said that this would not continue in July, when Saudi Arabia will pump its Opec quota.

"The voluntary cut has served its purpose and we are moving on. A good chunk of what we will increase in July will go into domestic consumption," Prince Abdulaziz told an Opec+ virtual news conference.

Saudi crude use for power generation typically increases in the hot summer months, the minister noted.

On Sunday, state oil company Saudi Aramco hiked its July selling prices for crude grades to all destinations in a move likely to discourage buying for storage but rather could help to lower inventories.

Prince Abdulaziz said the rise in Saudi selling prices could be seen as an indication of a return of global oil demand.

Saudi Arabia, Opec's de facto leader, and Russia have to perform a balancing act as they push up oil prices to meet their budget needs while not driving them much above US$50 a barrel to avoid encouraging a resurgence of rival US shale production.

Oil prices slipped today after Saudi Arabia said an extension of output cuts by Opec+ nations would not include extra voluntary cuts by a trio of Gulf producers.

Brent crude was down 14 cents, or 0.3%, at US$42.16 per barrel, by 1210 GMT, while US West Texas Intermediate crude fell 41 cents, or 1%, to US$39.14 a barrel.

Low prices have prompted Chinese buyers to boost imports. Purchases by the world's largest crude importer hit an all-time high of 11.3 million bpd in May.

But consultancy JBC Energy warned higher prices could discourage buying and undercut a fragile recovery in demand.

"We cannot shake the feeling that, price-wise, this market has gotten a bit ahead of itself and will need a good confluence of bullish surprises to continue in order to maintain current pricing levels," JBC said in note. – Reuters

source https://www.thesundaily.my/business/saudi-arabia-to-end-voluntary-cuts-on-top-of-opec-pact-oil-prices-slip-LB2542418