Focus on the price of oil, after the decision by OPEC+ to confirm the status quo and the choice of Saudi Arabia, communicated on the eve of extend its voluntary supply cuts through September.
Yesterday Riyadh announced the intention to extend supply cuts, amounting to 1 million barrels per day, until next month, also airing the possibility of renewing them later, in order to support a market, that of oil, which still remains weak, in his opinion.
Immediately following Saudi Arabia’s announcement, Russia also announced yesterday the goal of cutting oil exports, in September, by 300,000 barrels a day, according to Deputy Prime Minister Alexander Novak.
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Oil production cuts continue. Saudi Arabia’s moves
For its part, the OPEC+ commission – which includes both OPEC countries and non-OPEC countries such as Russia – announced that it “will continue to closely monitor market conditions”, confirming that “will respond to market developments, standing ready to take additional measures at any time”.
Oil price reaction remains supportive after OPEC+ announcement, following a rally that sent the WTI contract traded on New York’s Nymex soaring up to over $80 a barrel: a significant increase, equal to +22% since June 11th. In strong comeback too Brent oil, which has flown 19% since the same date.
With oil boom, energy sub-index S&P 500 +6% since the beginning of the third quarter
The rally in oil was such that it was also reflected in the prices of sub-index of the energy sector of the S&P 500 which, as a CNN article points out, has jumped more than 6% since the beginning of the third quarter, outperforming the Wall Street benchmark index.
Saudi Arabia’s cuts are confirmed by the way a bullish factor for crude prices: with the decision to extend the cuts, Riyadh has in fact announced overall the reduction of production at the record rate of recent years.
WTI and Brent oil prices are thus nearing conclusion the sixth consecutive week of increaseswith gains that were respectively equal, in this period, to +18.2% and +15.4%.
Saudi Arabia-Russia cuts reignite inflation fears
However, a rally that has led oil-consuming countries, as highlighted by an article in Bloomberg , to criticize in particular Saudi Arabia’s decision to extend the cuts, at a time when the forecasts are already sounding the alert of a considerable restriction on the market.
The risk, the energy-consuming countries have warned, is that Riyadh’s move rekindle inflationary pressures, causing further problems for consumer spending and therefore for the economy as a whole.
The article recalls how the Saudi Kingdom benefits from support of Russia, with Moscow which, also yesterday, announced that it will continue to reduce its exports by extending the cuts also in September, albeit at a slower rate, equal to a cut of 300,000 barrels per day.
Then there is Algeria, a producer country belonging to OPEC, which for the month of August had already opted for a voluntary cut of 20,000 barrels per day and which, according to sources interviewed by Reuters, he still has to make a decision about what to do.