Saudis to cut oil output in bid to boost falling prices

Move leads new effort by oil-producing nations to adjust production, end market pessimism

The group of major oil-producing countries known as OPEC+ said Sunday that it would embark on a complex effort to adjust production as it aimed to halt the recent slide in oil prices, including an additional cut in output of 1 million barrels a day by Saudi Arabia.

The Saudi cut would be for one month beginning in July, but could be extended.

The group, which also includes Russia and its allies, was under pressure to produce a deal to reverse the pessimism that has dominated the oil market in recent weeks. Despite two substantial output cuts since October, the price of oil has drifted about 15 percent lower over the past seven months.

The resulting deal reworks the output quotas of several countries, with some gaining and some losing production levels. “This is definitely not a clean and simple deal,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.

For American drivers, the move is unlikely to cause any significant swing in prices at the pump, which have remained steady despite the spike in travel over Memorial Day weekend and the usual uptick in driving anticipated for the summer. The prices — which averaged $3.55 per gallon nationally on Sunday, according to AAA — reflect global economic anxieties that are tamping down fuel demand.

In a news release, OPEC said its move sought ‘‘to provide long-term guidance for the market’’ and described it as ‘‘in line with the successful approach of being . . . proactive, and preemptive.’’

It followed the group’s surprise decision two months ago to cut production by 1 million barrels per day.

At the time, some analysts said the reduction threatened to send prices at the pump jolt

ing upward and the cost of a barrel of oil past $100. But oil prices continued to drop, with the price of Brent Crude hovering at $76 over the weekend. The cost of a gallon of regular unleaded is a few cents lower than it was a month ago, and $1.27 cheaper than it was this time last year, according to AAA.

‘‘Macroeconomic head winds are putting significant downward pressure on oil markets in recent weeks, despite the voluntary cuts’’ OPEC+ made earlier, said an e-mail from Jorge Leon, senior vice president of oil market research at Rystad Energy.

That is forcing the group to tread carefully. Cutting output, Leon said, could ultimately create more challenges for the consortium.

‘‘High oil prices would fuel inflation in the West right when central banks are starting to see inflation gradually recede,’’ he wrote. ‘‘This could prompt central banks to continue increasing interest rates, a detrimental move for the global economy and oil demand.’’

The decision Sunday comes amid some tension inside OPEC+. While Saudi Arabia, the dominant member, was believed to be advocating for cutting production in the hope of pushing the cost of a barrel of Brent past $80, smaller countries like United Arab Emirates have been eager to boost production, according to a research note from Capital Economics.

It is also unclear whether Russia has even complied with the earlier cuts OPEC+ announced this year. Oil tanker tracking data suggests Russia is flouting those agreements, according to Capital Economics.

As far as the markets are concerned, the key feature of the agreement is the additional production cut by Saudi Arabia. The Saudi oil minister, Prince Abdulaziz bin Salman, called the move “the Saudi lollipop” as he announced it during a news conference after the meeting.

Saudi Arabia’s announcement comes a couple of days before US Secretary of State Antony Blinken is scheduled to visit the country for talks with Saudi leaders.

Saudi Arabia is the de facto leader of OPEC+, and under Salman and his younger half brother, Crown Prince Mohammed bin Salman, the country has become more aggressive in its oil policies than in the past, preferring to make cuts in an effort to keep a floor under prices rather than letting markets take their course.

Crown Prince Mohammed, the kingdom’s main policymaker, wants high oil revenues to finance his ambitious development plans.

Although OPEC does not publish price targets and its officials say they take a long-term view, analysts say the Saudis are now uncomfortable with prices below $80 a barrel for Brent crude. With OPEC+ producing more than 40 percent of global oil supplies, the group can exert considerable sway over markets. In the past, Saudi-led OPEC trims have set off friction with the Biden administration, which wants to keep oil prices down to ease pressure on US drivers and to avoid putting a brake on the weak global economy.

‘High oil prices would fuel inflation in the West right when central banks are starting to see inflation gradually recede.’

JORGE LEON,

senior vice president of oil market research at Rystad Energy