Saudi Arabia announced plans to cut oil production by 1 million barrels per day (bpd) as the Kingdom pledged to do “whatever is necessary” to support lower prices.
Oil prices were expected to jump on Monday after the Gulf state’s surprise unilateral decision.
Saudi Oil Minister Prince Abdulaziz bin Salman has said the country will voluntarily cut oil production in a bid to drive up prices, after the OPEC cartel and its allies failed to s agree on a collective agreement on reductions.
This decision, which takes effect from July, is equivalent to a reduction of around 1% in global supplies.
A further drop in production is likely to stoke tensions with Joe Biden, who has encouraged producers to turn on the taps to keep prices low.
The US president, who has been politically hurt by rising fuel prices, has accused OPEC members of siding with Vladimir Putin by agreeing to cut production. US Secretary of State Anthony Blinken is due to visit Saudi Arabia this week.
The move also risks reigniting cooling inflation in Britain and Europe. Price increases across the economy have been closely linked to energy costs.
At a press conference in Vienna on Sunday evening after the OPEC+ meeting, Saudi Oil Minister Prince Abdulaziz bin Salman called the country’s production cut “a Saudi lollipop”, adding: “We wanted to frost the cake”.
The unilateral cut came at the end of a tense meeting marred by disagreements within the group of oil-producing countries.
The Saudis had hoped to agree to cut collective production by OPEC and its allies by one million barrels a day, sharing the cut among the members. However, no deal could be reached amid wrangling over quotas.
The members were forced to deny that there were tensions within the grouping. Russian Deputy Prime Minister Alexander Novak said there was no split with Saudi Arabia, while UAE Energy Minister Suhail Al Mazrouel told reporters: “We We will always support Opec and always stick together.”
Giovanni Staunovo, commodity analyst at UBS, said: “Despite a very long meeting, the group shows that it remains united, aiming to maintain balance in the oil market.”
He said oil prices would likely rise in early trading Monday morning. OPEC+ accounts for just over 40% of global production and OPEC controls around 80% of reserves.
Saudi Arabia’s decision to go it alone on the cuts comes after Prince Abdulaziz last week told traders who had bet against oil prices to “be careful”.
Oil prices have fallen over the past year despite repeated production cuts. Brent crude peaked at $125 a barrel a year ago, but was trading at just over $76 on Friday – below the level when Russia invaded Ukraine last February and below the crucial price $80 to which the Saudi government can finance its expenses.
OPEC+ announced a surprise oil production cut of 1 million bpd in April, sending prices skyrocketing. However, it had sagged since then due to worries about the outlook for the global economy.
Although OPEC and its allies did not agree to further cuts on Sunday, members pledged to extend voluntary cuts from April until the end of next year.
The expanded Opec+ group, which includes all 13 OPEC members and 10 additional producers, has pledged to cut production in 2024. However, the grouping will meet again in November and plans could change.
It came as the GMB union accused Labor of creating a ‘cliff edge’ with plans to ban new oil and gas production in the North Sea. General secretary Gary Smith said workers were “very worried” about proposals to ban new licenses in the North Sea, which the union said would make Britain more dependent on imports.
Mr Smith told Sky News: “Their policies are going to create a cliff edge with the extraction of oil and gas from the North Sea.
“There is a lot of oil and gas in the North Sea and the alternatives the country faces are that we produce our own oil and gas – take responsibility for our carbon emissions – or go and import more oil and gas.”
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