A sigh of relief for a weak crude market

Something odd is happening in the oil markets. Efforts by major oil producers to prop up oil prices above the current levels seem faltering — at least for the time being. Both Riyadh and Moscow, the oil heavyweights, need higher oil prices. Saudi Arabia needs Brent crude to trade at around $81 a barrel to balance its budget, the International Monetary Fund estimates. Moscow, too, needs additional cash flow to sustain its Ukraine war efforts. But markets are in a bearish mode. Moscow and Riyadh are now closely coordinating their moves to overcome the trend. Last Monday, almost simultaneously, both announced tightening their crude taps further. Saudi Arabia announced prolonging the already announced unilateral production cut of one million barrels per day (bpd) for July, by another month, into August. Riyadh emphasised the cut could be extended even beyond August. That will keep Saudi output at nine million barrels per day. A couple of days later, Saudi petroleum minister Prince Abdulaziz bin Salman even vowed to do ‘whatever is necessary’ to stabilise the markets.