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.
