Representational photo of the OPEC+ logo before an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria | Photo Credit: Reuters
Saudi Arabia and other OPEC+ oil producers announced on Sunday their output cuts of about 1.16 million barrels per day, which they said was aimed at supporting market stability.
The development comes a day ahead of a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which was already expected to cut 2 million bpd through the end of 2023.
Last month, oil prices fell to $70 a barrel, the lowest in 15 months, on concerns that the global banking crisis would hit demand. Still, further action by OPEC+ to support the market was not expected as sources downplayed the possibility and crude oil neared $80.
jump in oil prices
Oil prices jumped nearly $5 a barrel at the open on Monday after being jolted by a surprise announcement by OPEC+.
Sunday’s pledge brings the total amount of cuts by the Organization of the Petroleum Exporting Countries, Russia and other allies to 3.66 million bpd. reuters calculated, equivalent to 3.7% of global demand.
“OPEC is taking pre-emptive steps in case of any potential demand reduction,” Amrita Sen, founder and director of Energy Aspects, said on Sunday.
Last October, OPEC+ agreed Output cut of 2 million bpd From November through the end of the year, a move that angered Washington as tighter supplies pushed oil prices up.
The US has argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund the Ukraine war.
Sunday’s unexpected voluntary cut begins in May.
Russia to cut production by 500,000 bpd
Saudi Arabia said it would cut output by 500,000 bpd, while Iraq would cut its output by 211,000 bpd, according to official statements.
The UAE said it would cut production by 144,000 bpd, Kuwait announced a cut of 128,000 bpd, while Oman announced a cut of 40,000 bpd and Algeria said it would cut its output by 48,000 bpd. Kazakhstan will also cut production by 78,000 bpd.
Russia’s Deputy Prime Minister Alexander Novak also said on Sunday that Moscow would extend a voluntary cut of 500,000 bpd until the end of 2023. Moscow announced unilateral cuts in February following the introduction of the Western price cap.
An OPEC+ source said Gabon would make a voluntary cut of 8,000 bpd and not all OPEC+ members are joining the move as some are already pumping well below agreed levels due to a lack of production capacity.
After Russia’s unilateral cut, US officials said its alliance with other OPEC members was weakening, but Sunday’s move shows the cooperation is still strong.
The Saudi Energy Ministry said in a statement that the kingdom’s voluntary cut was a precautionary measure aimed at supporting the stability of the oil market.