Oil Prices Drop Over 20% in Two Months... Saudi Arabia Signals Production Cut

Abdulaziz bin Salman, Saudi Arabia's Minister of Energy
[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] As international oil prices have fallen more than 20% over the past two months, Saudi Arabia has hinted at the possibility of production cuts.

According to Bloomberg on the 22nd (local time), Saudi Energy Minister Abdulaziz bin Salman said, "The oil market is showing extreme volatility," and added, "OPEC Plus (OPEC+) may need to cut production."

OPEC+ is a consultative group consisting of OPEC and major non-OPEC oil-producing countries such as Russia.

The price of West Texas Intermediate (WTI) crude oil futures, which exceeded $120 per barrel in early June, has now fallen to the $90 range.

Minister Abdulaziz pointed out that the crude oil futures market price does not properly reflect supply and demand conditions. In other words, he diagnosed that the current oil price has fallen excessively. He also noted that the gap between oil prices and supply-demand conditions is widening.

He said, "The recent volatility in oil prices damages the basic functions of the market," and "It strengthens OPEC's determination to stabilize the oil market."

He stated that OPEC+ currently has the means and flexibility to address the problems in the oil market and that production cuts could be discussed at the September meeting.