Saudi Arabia, Russia to continue 1.3 mil b/d supply cuts to end 2023

Saudi Arabia and Russia have confirmed plans to continue combined 1.3 million b/d supply cuts until the end of 2023 and review the decisions monthly, officials said Oct. 4.

The two biggest OPEC+ producers are maintaining their policy of major cuts, despite recent oil price increases and forecasts of a large supply shortfall in the fourth quarter.

Saudi Arabia will keep its 1 million b/d cut, with output set to average 9 million b/d until the end of 2023, the Saudi Press Agency reported Oct. 4, citing an official source in the energy ministry.

Russian Deputy Prime Minister Alexander Novak confirmed Russia's plans to continue a 300,000 b/d export cut until the end of this year in a statement released Oct. 4.

"This voluntary cut decision will be reviewed next month to consider deepening the cut or increasing production," Novak said.

Both countries also confirmed that the cuts will be reviewed monthly and are aimed at supporting the stability and balance of oil markets.

These cuts are in addition to previously voluntary cuts led by Saudi Arabia and Russia totaling 1.7 million b/d, slated to be in force until the end of 2024. Both rounds of voluntary cuts are on top of quotas agreed by all OPEC+ member countries under the declaration of cooperation.

The decision to continue current policy was expected, with several OPEC+ officials backing the plans in recent days and analysts forecasting that they will remain in place for the near future.

Analysts at S&P Global Commodity Insights forecast that OPEC+ will not raise output unless prices are above $100/b for some time.

Platts, part of S&P Global, assessed Dated Brent at $94.68/b on Oct. 3, up around 25% since Saudi Energy Minister Prince Abdulaziz bin Salman announced the latest cut June 4.

Price levels of $100/b have prompted pressure from consumers and supply interventions in the past.

Furthermore, OPEC predicts a major supply shortfall -- of over 3 million b/d in the fourth quarter on production cuts and stock drawdowns.

Forecasting supply-demand dynamics until the end of the year has been complicated by significant uncertainty over Chinese demand and recessionary risks in Europe.

The Joint Ministerial Monitoring Committee overseeing the OPEC+ agreement meets Oct. 4 to discuss market conditions amid significant uncertainty over the global economy in the fourth quarter.

Currently, the next full OPEC+ ministerial meeting is scheduled for Nov. 26. The terms of the agreement allow for extraordinary meetings if member countries consider this necessary -- a step that they have taken in the past.