Saudis add 1 MMbbl to output cut to help stabilize oil prices

LONDON (Bloomberg) --Saudi Arabia announced an extra voluntary oil-production cut of 1 million barrels a day, bringing output to its lowest in 18 years as the kingdom tries to prop up a nascent recovery in energy markets.

Riyadh aims to pump just under 7.5 million barrels a day in June, compared with an official target under the most recent OPEC+ agreement of just under 8.5 million a day. If Saudi Arabia makes good on its pledge, its production will drop to the lowest since mid-2002, according to data compiled by Bloomberg.

The cut is particularly symbolic as it brings Saudi production below 8 million barrels a day, long seen by many consultants and traders as a red line the kingdom wouldn’t cross. It also signals the urgency felt by Riyadh to stabilize the market as rock-bottom prices force it to impose austerity measures, including ending monthly pay allowances for millions of public employees and raising taxes.

“The kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets,” an official at the Saudi Ministry of Energy said.

Riyadh also asked state-owned oil producer Saudi Aramco to reduce its production in May “in consent with its customers.” Under the most recent OPEC+ deal, Saudi Arabia was targeting production of 8.492 million barrels a day.

Oil prices immediately rose after the announcement on Monday, before paring gains. WTI, the U.S. benchmark, traded little changed at $24.76 a barrel as of 8:48 a.m. in New York.