Brent Hits $90 as Saudi, Russia Shock Market with Prolonged Cuts

By Adedapo Adesanya

The price of the international crude benchmark, Brent crude, jumped to $90.04 per barrel on Tuesday after growing by $1.04 or 1.2 per cent as Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year, raising supply worries.

This was the highest level Brent has reached since November 16, 2022, as the US West Texas Intermediate (WTI) crude futures gained $1.14 or 1.3 per cent to settle at $86.69 a barrel.

Saudi Arabia will extend its voluntary 1 million barrels per day crude oil production cut through the end of this year. Investors had expected Saudi Arabia and Russia to extend voluntary cuts into October, but the three-month extension was unexpected.

This brings Saudi Arabia’s targeted crude oil production to 9 million barrels per day for the remainder of the year.

On its part, Russia extended its voluntary decision to reduce its oil exports by 300,000 barrels per day to the end of this year, Deputy Prime Minister Alexander Novak said in a statement on Tuesday.

Both countries will review the cut decisions monthly to consider deepening cuts or raising output depending on market conditions.

Oil markets have been guessing how the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ will proceed with its oil production strategy, and this latest move offers some form of direction.

Saudi Arabia had proposed the additional 1 million barrels per day supply cut—a voluntary supply cut–as a July-only event. However, Saudi Arabia extended the production cut into August and September. The cut is not required as part of the deal reached with its OPEC and OPEC+ groups, rather it is in addition to the OPEC mandates.

Russia will join Saudi Arabia in extending the voluntary curbs allowing the Vladimir Putin-led country to collect more revenues amid its war in Ukraine and despite European Union attempts to limit the country’s income with a cap on Russian oil prices, which is now trading above the caps.

Also, support came as the flow of crude oil from Iraq to Turkey, which has been suspended since March 25 will not resume prior to October until Turkey’s President Tayyip Erdogan visits Baghdad. The trip was originally planned to take place in August but was pushed back.

The International Chamber of Commerce (ICC) suspended oil flows five months ago, ordering Turkey to pay the Iraqi government $1.5 billion in compensation for what it determined were unauthorized oil exports by the Kurdistan Regional Government (KRG) between 2014 and 2018 via the Iraq-Turkey pipeline and the port of Ceyhan.