(Bloomberg) -- When crude surges above $90 a barrel and the leaders of Saudi Arabia and Russia get on the phone to congratulate each other on a job well done, oil consumers should take note. Most Read from BloombergEverything Apple Plans to Show on Sept. 12: iPhone 15, Watches, AirPodsBoss of Failed Crypto Exchange Gets 11,000-Year SentenceCalifornia Shows an Electric-Car Uprising Headed for the USUS Probes Made-in-China Chip as Tensions Flare Over TechnologyEx-Google CEO Eric Schmidt Scraps $67
After half a year in the doldrums, the price of the world’s most important commodity is on a tear as the biggest players in OPEC+ get serious about making sure supply doesn’t exceed demand. The 1 million barrel-a-day output cut the Saudis initially pledged solely for the month of July will now be in place until year-end, alongside a smaller export reduction from Russia.
Russia’s extra cut is less than a third of the size of Riyadh’s and applies to exports rather than production, but their combined effect is forcing consumers to run down their inventories to satisfy demand, driving up prices in the process.Since July 1, international crude benchmark Brent has risen about 20%. The price in New York of diesel, a vital fuel to keep the global economy ticking over, has jumped by a third.
“Our supply-demand model shows some hefty deficits,” said Emily Ashford, a commodity analyst at Standard Chartered Plc. “A cut by Saudi Arabia has a lot more clout than purported cuts elsewhere — when they say they will do it, they really mean it.”When it announced the extension of its cuts, Saudi Arabia did say it would review the decision every month and could increase production if necessary. But observers of the kingdom say consumers shouldn’t expect it to change its mind this year.
Iran has been boosting production amid weaker enforcement of US sanctions, but its exports may have reached their peak for the year.
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