Arrow-right Camera
Go to e-Edition Sign up for newsletters Customer service
Subscribe now

COVID-19

News >  Business

Saudis take on burden of oil output cut to support price

UPDATED: Tue., Jan. 5, 2021

Seagulls fly as a man rides his bicycle in front of the Port on the Red Sea, in Jiddah, Saudi Arabia, Sunday, Dec. 27, 2020.  (Associated Press)
Seagulls fly as a man rides his bicycle in front of the Port on the Red Sea, in Jiddah, Saudi Arabia, Sunday, Dec. 27, 2020. (Associated Press)
Associated Press

Associated Press

FRANKFURT, Germany – Saudi Arabia said Tuesday it will cut its oil production by 1 million barrels a day, taking on the burden of supporting prices in the energy market as a “goodwill gesture” after a meeting with other crude-producing countries.

The decision came after a meeting between countries that are part of the OPEC oil cartel and allies like Russia that have coordinated their production levels in recent years in an effort to sway the market. The pandemic has sowed uncertainty about when an economic recovery might arrive and boost sagging demand for energy.

Leading OPEC member Saudi Arabia urged caution, saying demand for oil remains fragile even as the vaccination rollout raises hopes for an eventual return to more normal behavior. Its energy minister, Abdulaziz bin Salman, told a news conference on Tuesday that his country would unilaterally cut its output to help support prices.“We hope this gesture of good will not be in vain,” he said.

OPEC countries and allies like Russia had decided in December to gingerly increase daily production by 500,000 barrels at the start of the new year and then to reassess the oil market every month. Their goal is to eventually increase production by 2 million barrels a day. That would partially withdraw the 7.7 million barrels a day in production cuts agreed last year.

OPEC faces conflicting pressures after last year’s plunge in oil prices as the pandemic held back energy use and travel. Last year’s output cuts kept prices from collapsing even more than they would have. Raising production now as recovery beckons in the distance would increase revenues for producing countries that have seen their budgets hard hit by lower prices. But pumping too much too soon could undermine the modest rebound in energy prices.

The decision Tuesday saw energy prices jump. Oil rallied 5.4% to $50.18 per barrel on the New York Mercantile Exchange while the international benchmark, Brent crude, rose 5.4% to $53.84.

The Spokesman-Review Newspaper

Local journalism is essential.

Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.

Active Person

Subscribe to the Coronavirus newsletter

Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.