In a series of public statements, on Sunday (April 2), Saudi Arabia and other OPEC+ members announced that they would further reduce oil production amounting to around 1.16 million barrels per day. The move, according to the countries, is aimed at market stability. The announcement comes a day before a virtual meeting of an OPEC+ ministerial panel is to convene, reported Reuters.
The unexpected cuts announced by Saudi Arabia, Iraq, United Arab Emirates, Kuwait, Algeria, and Oman will begin in May and will last till the end of the year with more than one million barrels per day it will be the biggest reduction since the last one when the oil producers slashed two million barrels per day in October.
The move also comes after oil prices dropped last month to $70 per barrel which was the lowest in 15 months and following concerns that a global banking crisis would affect demand. However, following the pledges on Sunday, the oil prices are expected to surge by at least $10 per barrel, said the head of investment firm Pickering Energy Partners, as per Reuters.
The Organization of the Petroleum Exporting Countries (OPEC) which includes Saudi Arabia and Russia made the announcement in a series of public statements by different countries and called the move a “precautionary measure”.
Similarly, Russian Deputy Prime Minister Alexander Novak, said that Moscow will extend its voluntary oil production reduction by 500,000 barrels per day until the end of this year. This also comes after Moscow had previously announced production cuts unilaterally in February following Western price caps on Russian oil.
“As responsible and preemptive actions, Russia will extend its voluntary oil production reduction by 500,000 barrels a day until the end of 2023 from the average production level in February established in conformity with independent sources,” said Novak.
The Russian minister also talked about how the global oil market is going through a period of high volatility and unpredictability due to the recent banking crisis in the United States and Europe. Notably, not all OPEC+ members were joining the cuts as many are already extracting much less than the levels agreed upon due to limited production capacity.
Production cuts announced by OPEC+ members, as per their official statements:
UAE: 144,000 bpd
Kuwait: 128,000 bpd
Oman: 40,000 bpd
Algeria: 48,000 bpd
Kazakhstan: 78,000 bpd
Russia: 500,000 bpd
According to Reuters calculations, the total volume of cuts by the OPEC+ members would be 3.66 million bpd which amounts to 3.7 per cent of the global demand. This also comes months after OPEC+ had agreed to slash output by two million bdp from the following month, a move which was criticised by the United States as lower supply increased the price of oil.
Washington has also argued that the world needs lower prices to prevent Russian President Vladimir Putin from earning revenue and funding what Moscow calls its “special military operation” in Ukraine.
(With inputs from agencies)
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