Saudi Arabia has chosen to pump out less oil, as it tries to prop up prices so that it can press ahead with its massive spending projects.
In April, the Gulf Kingdom announced that it would slash crude production by around 10% – or 1 million barrels a day – in a surprise move that shocked commodity markets.
It expects its output to fall to just 9 million barrels a day for the next two months, meaning it will lose its status as the OPEC+ cartel’s top oil producer to Russia, according to a recent report by the International Energy Agency.
Saudi Arabia is sacrificing some of its share of the oil market in a bid to push up prices, which it needs to stay high in order to fund its massive spending projects. The commodity accounts for over 40% of the country’s economic output, according to data from Forbes.
Key benchmarks that track the commodity’s price have tumbled over the past year, with would-be buyers fretting about a potential global recession that could sap demand.
Oil now trades at just over $80 a barrel – and Saudi Arabia needs prices to be at, or above, that level to fund its future spending commitments, according to research by the International Monetary Fund.
That includes the money that it’s pouring into professional sports.
Saudi Arabia has made huge moves in that field in recent years, taking over the English soccer club Newcastle United for over $400 million in 2021 and launching the breakaway LIV Golf tour last year.
It’s also made efforts to woo individual athletes, with soccer stars Cristiano Ronaldo and Karim Benzema both signing contracts to play in the country and top golfers like Dustin Johnson and Brooks Koepka agreeing to leave the PGA for LIV.
But it’s reliant on oil prices remaining high to fund those moves – and that’s why it’s about to stop producing so much black gold.
Source : MarketsInsider
