Oil producing countries extend production cuts to support prices

Saudi Arabia and others oil countries They extended production cuts on Sunday through the end of next year to shore up prices that have not risen despite turbulence in the Middle East and the start of the summer travel season.

The OPEC+ alliance, made up of members of the oil cartel and allies, including Russia, decided in an online meeting to maintain current production levels, which collectively include cuts of 2 million barrels per day, until December 31, 2025.

The Saudis need higher prices to finance Prince Mohammed bin Salman’s ambitious plans to diversify the economy and make it less dependent on fossil fuels. Higher oil prices would also help Russia maintain growth and economic stability as it spends heavily on its war against Ukraine.

The OPEC+ statement does not specify what will happen to other voluntary reductions, which include a reduction of 2.2 million barrels per day by a smaller group of alliance members, including the Saudis. Analysts predicted that these unilateral cuts, which were set to expire at the end of the month, would also be extended.

The price of Brent crude oil has been around $81-$83 a barrel over the past month. Not even the war in Gaza or attacks by Houthi rebels on ships in the Red Sea have driven prices to the $100 per barrel last seen in September 2022. This is partly due to higher interest rates. , demand concerns due to lower-than-expected economic growth in Europe and China, and increased supply from non-OPEC countries such as the United States.

American drivers have benefited from lower oil prices. Gasoline prices held around $3.56 per gallon last week, down a penny from a year ago. This is a sharp drop from the record of $5 per gallon recorded in June 2022.

Gasoline prices in the United States rise when the price of oil rises because the price of oil makes up half the cost of a gallon of gasoline. In Europe the variations are less felt because there taxes form a greater part of the price of gasoline.