Saudi Arabia and allied oil producing countries on Sunday extended output cuts through next year, a move aimed at supporting slack prices that haven’t risen even amid turmoil in the Middle East and the start of the summer travel season.

The OPEC+ alliance, made up of members of the producers cartel and allied countries including Russia, extended three different sets of cuts totaling 5.8 million barrels a day.

International benchmark Brent has loitered in the $81-$83 per barrel range for the past month. Even the war at Gaza has not pushed prices up toward the $100 per barrel level last seen in September 2022. Reasons include rising non-OPEC production, higher interest rates and concerns about demand due to slower than desired economic growth in Europe and China.

The Saudis need higher oil prices to fund ambitious plans by Crown Prince Mohammed bin Salman to diversify the country’s economy away from fossil fuel exports. Higher oil prices would also help Russia maintain economic growth and stability as it spends heavily on its war against Ukraine.

“The probable extension of the voluntary production cuts by OPEC+ should cause oil prices to rise again,” says a commodities analyst at Germany’s Commerzbank, Barbara Lambrecht. “Ultimately, this would threaten a significant undersupply on the oil market in the third quarter.” Her assessment was that “oil prices will rise significantly in the coming weeks.”

Price increases in the July-September quarter would come as the election campaign between Presidents Biden and Trump gets into full swing. Gas prices have been quiescent recently, averaging $3.56 per gallon last week, a penny less than a year ago. That is down from a record national average high of $5 per gallon in June 2022.

Demand for fuel over the Memorial Day holiday weekend May 25-27 was weaker than last year. Still, demand typically spikes over the summer months as travel increases. Gas prices are a sensitive matter in the United States and inflation has left many people disgruntled with the state of the economy despite relatively strong growth and low unemployment.

Gas prices rise along with crude because the price of oil makes up half the cost of a gallon of gasoline. The price swings are much smaller in Europe because taxes make up a bigger proportion of the price of fuel on the continent.

Associated Press