Oil prices dropped on Wednesday after Saudi Arabia, the world’s largest oil exporter, announced that it will maintain its crude output cuts until the end of 2023. The move was seen as an attempt to support the oil market amid rising concerns over the global economic recovery and oil demand.
Saudi Arabia said in a statement that it will continue to reduce its oil production by 400,000 barrels per day (bpd) in October, as part of the OPEC+ agreement to balance the oil market. The kingdom also cut its official selling prices (OSPs) for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel for October, signaling weak demand in the region1.
The price cuts were larger than expected, according to a Reuters poll among Asian refiners1. Analysts said that the Saudi move reflected the uncertainty over the impact of the Delta variant of the coronavirus on oil consumption, especially in Asia, where several countries are facing new lockdowns and travel restrictions.
Oil prices have been under pressure in recent weeks, as fears of a slowdown in the global economic growth and oil demand outweighed the supply disruptions caused by Hurricane Ida in the US Gulf Coast and other geopolitical tensions.
The OPEC group also warned on Tuesday that oil demand growth will slow down in the second half of 2023, due to seasonal factors and uncertainties over the pandemic3. The group lowered its forecast for global oil demand growth in 2023 by 110,000 bpd to 5.96 million bpd3.
The oil market will be closely watching the US inventory data due later on Wednesday and Thursday, as well as the monthly reports from OPEC and the International Energy Agency (IEA) expected on Thursday and Friday, respectively.