Leading OPEC producer, Saudi Arabia, has extended its voluntary 1M bbl/day oil production cut for another month, till August. The reduction will take the country's production to ~9M bbl/day, the lowest level in several years.
Unfortunately, oil traders remain unconvinced, with Marwan Younes, chief investment officer of hedge fund Massar Capital Management, saying the gains are likely to be short-lived.The problem is when you cut production in an already weak environment, the impact is limited. It looks like we could be here for a while,On Tuesday, Morgan Stanley t and predicted an oil surplus during the first half of 2024, thanks to non-OPEC supply growing faster than demand.
Oil prices kicked off the second half of the year, trading around the $71 per barrel level, and have steadily traded below their 100-day moving average since the end of April. Oil prices have declined nearly 12% in the year-to-date.The bulls can also count on Saudi Arabia and OPEC to maintain tight production discipline, with members hell-bent on maintaining relatively high oil prices after enjoying rare budget surpluses in 2022.
According to the Kingdom's finance ministry, releasing what it said were preliminary estimates, the country's 2022 surplus clocked in at 102 billion riyals , good for 2.6% of its gross domestic product . Total revenue for this year was estimated at 1.234 trillion riyals, while spending amounted to 1.132 trillion riyals.The Saudi government approved a 1.114 trillion riyal budget for 2023 and expects to still record a surplus of 16 billion riyals for the year.
The petrodollar windfall has really given a boost to battered Gulf economies, allowing some Gulf Arab states to pay down debt and others to diversify their oil-reliant economies in very big ways. According to Reuters, all the six Gulf Arab states--Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman--posted budget surpluses, many for the first time in a decade thanks to buoyant oil prices and years of fiscal reforms.
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