Saudi Arabia surprised markets, voluntarily reducing oil production

Saudi Arabia surprised markets, voluntarily reducing oil production

Saudi Arabia's decision to voluntarily reduce oil production could have an effect on the global oil market for most of 2021, although measures against the spread of coronavirus still limit demand. Saudi Arabia, the world's largest oil exporter, surprised markets on January 5 by voluntarily cutting production by one million barrels a day in February and March. It decided to take this step after the Organization of the Petroleum Exporting Countries (OPEC) and other oil states decided to keep production stable. Russia even intends to increase mining slightly. According to Reuters, reports of a reduction in production have raised prices to an 11-month high. If spot prices are higher than futures prices, it can motivate traders to release oil from stocks. In its latest forecast, Goldman Sachs expects demand to fall by one to two million barrels a day in January, February and March. It expects a market deficit for most of the year, reaching a peak of 2.3 million barrels per day in September, representing almost 3 percent of global deliveries in that month.