On Sunday, Saudi Arabia announced that it would reduce oil output by one million barrels per day from next month.

The cut, which amounts to approximately 1% of global supply, came after the benchmark Brent contract traded close to $70/barrel last week.

While Brent traded as high as $76.65 on Monday as markets reacted to the announcement, it has eased to under $74 on Tuesday morning.

The International Monetary Fund calculated that Saudi Arabia needs oil at around $81/barrel to balance its budget.

If it continues to cut production with that price in mind, it means the price of refined products such as diesel will also stay higher.

Ambitious plans

Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, has ambitious plans to modernise his country and pivot the economy away from reliance on oil revenue.

Unfortunately for everyone outside Saudi Arabia, he needs oil revenue now to pay for that change.

This is particularly bad news for us in Ireland, where the reversal of the excise duty cuts is under way.

There was a 1c/l increase last week, with a further 1c/l scheduled for September and another 3c/l at the end of October.

If the price of oil on global markets was allowed to fall, then these excise hikes would be easier to bear. However, as it showed this weekend, Saudi Arabia will do all it can to stop that fall happening.