Saudi Arabia’s pledge to cut 1 million barrels of production per day starting July and the extension of cuts by others to the end of 2024 is contributing to a modest gain in oil prices of under 2%. These cuts were accompanied by a Mario Draghi-style ‘whatever is necessary’ pledge by the Saudi oil minister that indicates a bias to possibly do more. One reason these cuts have modest, and usually fleeting effects is that OPEC+ isn’t what it used to be; it accounts for just 40% of world oil production. Another reason is that being a cartel invites cheating across members. A third reason is that there are many other supply and demand considerations, and it’s the demand side particularly related to China’s challenges that have dominated of late. - Scotiabank
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