Saudi Arabia pledged to make a deep cut to its oil production in July on top of a broader OPEC+ deal to limit supply into 2024. Energy minister Prince Abdulaziz said the country's output would drop to 9 million barrels per day (bpd) in July from around 10 million bpd in May, the biggest reduction in years.

Will the announced cuts result in higher oil prices – possibly reaching $100 per barrel like last year? It depends, an analyst at Kpler told CGTN. If it is a real production cut, then the impact could be big. But if it's just a covert way to reallocate quotas with no immediate impact on total output levels, then the market will treat it as it is, with crude most probably falling from currently $76 back to $70 per barrel. In other words, OPEC might solely formalize the already existing underproduction of several OPEC members.

But why cut production in the first place? It is first and foremost an admission that demand into 2023 will not be as strong as most analysts anticipated. OPEC+, which includes allies such as Russia, pumps around 40 percent of the world's crude, meaning its policy decisions can have a major impact on oil prices.

However, it took quite a while for OPEC+ energy ministers to agree on a final decision during their Sunday meeting. After a delayed start, it was difficult for OPEC's most influential members to persuade underproducing African countries to establish realistic output targets, Reuters sources say.

This newest output cut will be added to already existing cuts of 3.66 million barrels per day. 

Those cuts were valid until the end of 2023 and on Sunday OPEC+, in a broader deal on output policy agreed after seven hours of talks, said it would extend them until the end of 2024.

However, these previous cuts proved to have little impact on the oil price. So the question remains by how much OPEC actually wants – or is able to – raise prices. 

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