On Tuesday, Saudi Arabia announced that it will extend the current cut of one million barrels of oil a day to the end of the year, according to the Wall Street Journal. Russia’s deputy prime minister, Alexander Novak, also said that Russia will also keep its 300,000 barrel a day output through December.
The Associated Press reports that the extended cut will take 1.3 million barrels of crude oil out of the global market. The New York Times stated that together, the cuts could amount to more than one percent of global supplies, although Russia’s contribution to the reduction may be difficult to track.
The original cuts were announced in early summer, and have been extended month to month, reported the Times. The move to extend them by three months surprised some market analysts.
The cut of this crude is translating into the diesel market, according to the Journal. “Diesel is more heavily affected because of the type of crude that’s being taken out of the market,” said Alan Gelder, vice president for refining, chemicals and oil markets in Wood Mackenzie’s commodities research business. “Saudi’s oil provides a higher yield for diesel than lighter crude oils.”
While a reduction in global oil supply will continue to affect the U.S. Strategic Petroleum Reserve, the United States reported plans to replenish the SPR back in July.