Saudi Arabia to further cut oil production: ‘new norm will be $80 to $90’

Oil prices are in focus this morning after Saudi Arabia said it will lower production further from next month.

Analyst reacts to the production cut

Kingdom was the only constituent of OPEC+ that announced plans of cutting production by another one million barrels a day over the weekend.

Others included in the bloc left their projections unchanged for the rest of the year. On CNBC’s “Worldwide Exchange”, Viktor Katona – the lead crude analyst at Kpler said:

I think Saudi Arabia will do everything that it requires to keep prices close to $80 per barrel. That’s roughly its fiscal budget break-even level.

The announced production cut will result in a massive deficit of 3 million barrels a day in July, as per Rystad Energy. Both WTI and Brent are in the green on Monday.

Katona’s forecast for oil prices

Saudi Arabia produced roughly 10 million barrels per day in May. That output will decline to about 9 million barrels a day in July.

That’s even more significant considering the timing – right at the peak summer season. Still, unlike many, Katona doesn’t expect oil prices to surpass $100 a barrel.

The new norm will be between $80 and $90. That’s where Saudi Arabia and other OPEC+ heavyweights want it because it’s good for the budget and is not high enough to antagonize everyone.

Nonetheless, his forecast is in stark contrast with another energy expert Paul Sankey of Sankey Research who recently said that oil prices could crash to $60 per barrel (read more).