The rally in oil prices was looking likely to extend for a sixth straight week after major producer Saudi Arabia announced that it would extend its July-August production cut of one million barrels per day to September as well
NEW YORK (Pakistan Point News / Sputnik - 03rd August, 2023) The rally in oil prices was looking likely to extend for a sixth straight week after major producer Saudi Arabia announced that it would extend its July-August production cut of one million barrels per day to September as well.
In a development reported a day after crude prices fell sharply for the first time since the oil rally began in late June, an official at the energy ministry in Saudi Arabia was quoted saying by the kingdom's state news agency SPA that the production cuts would not only be extended but also deepened if necessary.
"This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," the energy ministry official was quoted saying.
OPEC+ groups the 13-member Saudi-led OPEC, or Organization of the Petroleum Exporting Countries, with 10 independent oil producers steered by Russia.
With 30 minutes to Thursday's settlement, US West Texas Intermediate, or WTI, crude was up $2.04, or 2.6%, to $81.53 per barrel. In Wednesday's session, the U.S. crude benchmark lost 2.3%. Week to date, WTI was up more than 1%, after a near 16% gain through July.
London-based Brent crude was up $1.90, or 2.3%, to $85.10. For the week, the global oil benchmark gained 0.3%, after running up nearly 14% for July.
Wednesday's 2% slump in oil marked the first meaningful decline on the market since the rally in oil began a month and a half ago. It came despite the Energy Information Administration reporting an epic drop of 17 million barrels in US crude stockpiles last week after the agency had cited for weeks paltry inventory changes despite the production cuts supposedly carried out by the Saudis.
The EIA report aside, there was also a story suggesting the Saudis might be selling unaccounted oil to the so-called PNZ, or Partitioned Neutral Zone, region it shared with Kuwait that escapes the radar of the broader market.
"Saudi Arabia has a long history of doing this, so it's no surprise that it's looking to increase its oil sales through extra production from the PNZ (Partitioned Neutral Zone) shared with Kuwait), particularly as the area's so off the radar, and Russia has been doing the same with its oil for months," OilPrice.com quoted a senior source in the European Union energy security complex as saying.
According to that source, although a joint statement by Saudi Arabia and Kuwait on 9 July said that accelerated efforts to complete joint oil projects in the PNZ are to meet local energy demands, they also provide Saudi Arabia with off-the-radar - or 'dark inventory' - oil that it can sell through various backdoor methods at currently inflated prices, without being seen to break its official OPEC+ quota.
