The latest production cuts by Saudi Arabia, the world’s largest oil exporter, underscore the intense pressure exerted by the oil slump on the Middle East nation’s budget.
“They need to raise prices and stabilize the oil market because that’s their ATM,” said Helima Croft, head of the global commodity strategy at RBC Capital Markets.
A Saudi energy ministry official told state media that the kingdom hopes that further cuts will “encourage” OPEC + and “other producer countries” to provide “additional voluntary cuts” in support of the oil markets.
“Just a few weeks ago, Saudi Arabia was flooding the oil market. They are now completely reversing their position,” said Ryan Fitzmaurice, Rabobank’s energy strategist.
Oil markets mingled with unstable exchanges in response to Saudi Arabia’s latest rescue efforts.
American crude rose nearly 2% to $ 25.20 a barrel on Monday morning. Brent, the global benchmark, had barely changed at $ 31 a barrel. This is well below the $ 80 a barrel that Saudi Arabia needs to balance its budget.
That’s why Saudi Arabia is making even more cuts in June and potentially even before then. State media reported that the Saudi Ministry of Energy has directed Saudi Aramco, the national oil company, to “try to reduce” even May production “in consensus with its customers”.
“It’s just another sign that the price war is definitely over. Saudi Arabia has come back in any way,” said RBC analyst Croft.