Saudi Arabia cuts oil output by 1 million barrels per day to boost sagging prices

Analysts had largely expected OPEC+ producers to maintain their current policy

Saudi Arabia said on June 4 that it will reduce how much oil it sends to the global economy, taking a unilateral step to support the sagging cost of crude after two earlier production cuts by members of the OPEC+ alliance of major oil-producing countries failed to push prices higher.

The announcement of the Saudi cuts of 1 million barrels per day, which will start in July, followed a meeting of the alliance at OPEC headquarters in Vienna. The rest of the OPEC+ producers agreed to extend earlier cuts in supply through the end of 2024.

“This is a grand day for us, because the quality of the agreement is unprecedented,” Saudi Energy Minister Abdulaziz bin Salman said in a news conference, adding that the new set of production targets are “much more transparent and much more fair.”

The slump in oil prices has helped U.S. drivers fill their tanks more cheaply and given consumers worldwide some relief from inflation. That the Saudis felt another cut was necessary underlines the uncertain outlook for demand for fuel in the months ahead.

There are concerns about economic weakness in the U.S. and Europe, while China’s rebound from COVID-19 restrictions has been less robust than many had hoped.

Saudi Arabia, the dominant producer in the OPEC oil cartel, was one of several members that agreed on a surprise cut of 1.16 million barrels per day in April. The kingdom’s share was 500,000.

That followed OPEC+ announcing in October that it would slash 2 million barrels per day, angering U.S. President Joe Biden by threatening higher gasoline prices a month before the midterm elections.