Crude oil prices are expected to rise after Saudi Arabia cuts production from July, but they are expected to remain range-bound, experts said.

Saudi Arabia, the world’s largest oil producer, said it would cut oil production by 1 million barrels per day (bpd) from July 2023. Saudi currently produces 10 million barrels of crude oil per day.

The experts said demand from China, which has largely remained weak, would contribute to dragging prices down.

“There is a possibility of crude oil prices to go up due to cuts announced by Saudi Arabia and a slight uptick in economic activity,” said Suman Chowdhury, executive director of Acuite Ratings. “At this point, it does not look like we’ll see a very substantial upward movement but up to $80 per barrel is a possibility with the July Saudi cuts.”

Even though the Organisation of Petroleum Exporting Countries and its allies, commonly known as OPEC+, announced oil supply cuts earlier to maintain prices, crude has hovered at about $75 per barrel in 2023. Prices touched an all-time high of $140 per barrel in March 2022.

OPEC+, led by Saudi Arabia, announced a further supply cut of about 1.16 million bpd starting in May to put pressure on oil prices. Earlier, OPEC had agreed to cut production by 2 million bpd from November 2022 until the end of 2023, despite US government calls to pump more oil.

After the cuts announced by the oil cartel, prices did not rise as expected. Lacklustre demand from China, high inflation globally and recession fears in many European countries resulted in crude oil prices declining.

“Reports of higher supplies from Iran along with a weaker global economy are impacting crude oil prices,” said Avishek Datta, a research analyst at Prabhudas Lilladher. “Similarly, there have been reports of supply cuts not being materialised from Russia. Therefore, crude oil prices would not shoot up.”

OPEC countries have wanted to maintain crude prices at about $80 per barrel. Russian energy minister Nikolai Shulginov said recently it was “realistic” to believe that oil prices could reach about $80 per barrel this year.

Hetal Gandhi, director of research at Crisil, said, “Crude oil prices would edge a little upwards in line with the cuts announced by Saudi and the beginning of the US driving season. While we do not expect substantial month-on-month increase in demand, gasoline inventory in the US would come down, which would in turn result in an upward trend in crude prices. We may see prices reach $80 per barrel in the near term.”

Demand from China remains a key monitorable for the movement of prices in 2023, said experts. The country reported weaker-than-expected economic growth despite lifting Covid-19 lockdowns.