Oil prices have climbed after Saudi Arabia announced a million barrels per day (bpd) decrease in July.

Other members of Opec+, a group of oil-producing countries, agreed to maintain production curbs in an effort to shore up falling prices.

Opec+ controls over 40% of the world’s crude oil, and its actions have a significant impact on oil prices.

Brent crude oil jumped as much as 2.4% in Asia trade on Monday before closing at approximately $77 per barrel.

Opec+ stated that production targets would be reduced by 1.4 million bpd beginning in 2024.

The oil-rich nations met for seven hours on Sunday against the backdrop of declining energy prices.

Oil prices skyrocketed when Russia invaded Ukraine last year, but have since returned to pre-conflict levels.

In October of last year, Opec+, an acronym for the Organization of Petroleum Exporting Countries and its allies, agreed to reduce production by two million barrels per day, or about 2% of global demand.

In April of this year, the group agreed to additional cuts that would run through the end of the year. However, Russian Deputy Prime Minister Alexander Novak stated that the talks on Sunday resulted in “the extension of the deal until the end of 2024.”

Why are the world’s major oil producers reducing supply?
Saudi Energy Minister Prince Abdulaziz bin Salman stated on Sunday that his country’s one million bpd cut might be extended beyond July if necessary. “This is a Saudi lollipop,” he stated, in an apparent attempt to calm the market.

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Sameer Hashmi, Middle East business correspondent, provides an analysis.
Before the two-day Opec+ conference began, it was widely assumed that the oil cartel would decrease production to support prices. Most members appear to be opposed to the notion, as any cuts would have an influence on oil earnings, which are critical to keeping their economies operating.

Saudi Arabia’s decision to reduce its oil output by one million barrels per day was unexpected, but not shocking. As the leader of the pack and the largest oil exporter, it was the only one in a position to reduce output.

From Riyadh’s perspective, the price of crude must remain over $80 per barrel in order for the project to break even. Saudi officials want higher prices so that they can continue to spend billions of dollars on ambitious projects sponsored by Crown Prince Mohammed bin Salman, who is attempting to diversify the kingdom’s economy away from oil.

The Saudi action also highlights the uncertain picture for petroleum consumption in the coming months. Concerns about the global economy, particularly recessionary fears in the United States and Europe, are projected to put additional downward pressure on crude prices.

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As a result of Russia’s invasion of Ukraine, oil producers are dealing with dropping prices and increased market volatility.

The West has accused Opec of price manipulation and damaging the global economy by driving up energy prices. It also accused the group of siding with Russia despite sanctions imposed in response to the invasion of Ukraine.

In response, Opec sources claim that the West’s monetary policies over the last decade has pushed inflation and compelled oil-producing countries to respond in order to keep the value of their main export stable.