Oil Prices Jump As Russia, Saudi Arabia Extend Cuts

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Oil prices jumped dramatically on Tuesday morning as Saudi Arabia announced it would extend its production cuts until the end of the year and Russia announced it would extend its export cuts of 300,000 bpd for the same period.

Russia extended its voluntary decision to curb crude exports by 300,000 b/d until December 2023, acting in concert with Saudi Arabia, with the alleged aim of maintaining stability and balance in the oil markets.

In the meantime, Russian seaborne crude and product exports fell to their lowest since September 2022 as strong domestic demand in the summer kept volumes available for external markets capped.

Delivering on their promise to cut exports by 500,000 b/d in July-August, Russian flows to India decreased by 30% to 1.5 million b/d, just as Urals has been trading above the oil price cap threshold of $60 per barrel since early July.

Lower Russian crude exports will ease the task of the country’s exporters as they are set to rely more on their shadow fleet, the utilization of which rose to 40-45% of all oil exports in July-August, avoiding G7 shipping and insurance.

ICE Brent prices jumped above $90 per barrel after Saudi Arabia and Russia extended their supply curbs until December 2023, with the former maintaining production cuts of 1 million b/d whilst the latter keeping oil exports lower by 300,000 b/d. With Chinese manufacturing data finally bouncing back to growth in August, the bearish sentiment is gaining the upper hand in oil markets right now.

Publishing its press release in unison with Russia’s export cut pledge, Saudi Arabia decided to extend its voluntary production cut of 1 million b/d for three months until December 2023, with any prospective supply changes to be reviewed on a monthly basis.

Low US distillate inventories could make heating oil prices be susceptible to sudden shocks this winter as stocks of diesel and heating oil remain 15% below five-year average rates, at 118 million barrels or 31 days of supply.

Brazil’s national oil company Petrobras (NYSE:PBR) stated it would no longer seek to sell some of its key assets, including the Urucu and Bahia-Terra onshore fields and Petrobras Operaciones, its subsidiary in Argentina, following a broad strategy revision.

The US government supported Chevron’s (NYSE:CVX) plans to connect its Cyprus gas finds to Egypt’s existing LNG terminals, a move the Cypriot government opposes, saying the linkage would bring stability to the region and allow for more exports.

The G7 coalition is not planning to change the current crude and product price caps on Russian exports, said US Treasury official Eric van Nostrand, saying the existing sanctions were effective in limiting Russian revenues while ensuring a well-supplied market.

Venezuela’s exports fell 38% month-on-month to 544,000 b/d after a three-year high in July as PDVSA struggled to keep crude upgraders in service, with a quarter of those volumes coming from US major Chevron (NYSE:CVX).

Saudi Arabia’s national oil company Saudi Aramco (TADAWUL:2222) is considering selling as much as $50 billion in a secondary share offering on the Riyadh stock exchange, potentially looking to carry the SPO out before year-end.

The average waiting time for non-booked tankers at the Panama Canal jumped by 50% in August to roughly 9 days as a prolonged drought led to transit restrictions, with canal authorities now only allowing 32 vessels to pass, also limiting their draft to 44 feet.

German chancellor Olaf Scholz stated the European country will not reopen its nuclear debate, calling nuclear a ’dead horse’ in Germany, just as its government is striving to cap electricity prices for industry by means of state subsidies.

The Taliban claims it has signed seven mining contracts that would bring $6.5 billion in investment as Afghanistan seeks to tap into its iron ore, lead, zinc, gold, and copper deposits, with local companies teaming up with partners from China, Iran, and Turkey.

Following in the footsteps of ExxonMobil (NYSE:XOM) and Shell (LON:SHEL), Italian oil major ENI sold its Nigerian onshore subsidiary to local upstream firm Oando for an assumed sum of approximately $500 million, focusing exclusively on offshore projects.

Supertyphoon Saola disrupted China’s offshore crude output as the country’s key deepwater producer CNOOC (HKG:0883) evacuated more than 10,000 workers from offshore production platforms.

With the first phase of strikes at Chevron’s (NYSE:CVX) Gorgon and Wheatstone LNG platforms in Australia’s offshore set to start this Thursday and unions planning a total strike from September 14, the US major started expedited mediation talks.