On Sunday, Saudi Arabia and other Opec+ oil producers made a surprising move by announcing voluntary cuts to oil production amounting to roughly 1.15 million barrels per day (bpd) They justified this action by saying they wanted to support market stability.
When the group’s ministerial panel, which includes Saudi Arabia and Russia, meets virtually on Monday, it was widely anticipated that they will maintain the previously agreed upon 2m bpd cutbacks.OPEC and its allies, led by Russia, agreed in October to reduce production by 2 million barrels per day (bpd) beginning in November and continuing until the end of the year. This decision infuriated the United States government since it would lead to higher oil prices.
The United States has made the case that reduced global pricing are necessary to spur economic growth and stop Russian President Vladimir Putin from using additional cash to finance his military intervention in Ukraine.
The voluntary cuts announced on Sunday, effective in May, are in addition to the mandatory reduction announced in October.
The Saudi government has announced a production decrease of 500,000 barrels per day, while the Iraqi government has announced a reduction of 211,000 barrels per day.
The United Arab Emirates declared a 144,000 bpd drop in production, Kuwait said it would cut by 128,000 bpd, Oman said it would cut by 40,000 bpd, and Algeria said it would cut by 48,000. And 78,000 bpd will be taken out of Kazakhstan’s production.
Russia will also keep its voluntary oil cut
Russia will keep its voluntary cut of 500,000 bpd through the end of 2023, Deputy Prime Minister Alexander Novak stated on Sunday. With the establishment of Western price restrictions in February, Moscow announced such reductions unilaterally.
The United States had claimed that Russia’s partnership with the other Opec members was deteriorating after its unilateral reductions, but Russia’s action on Sunday demonstrates that the cooperation is still strong.
In a statement, Saudi Arabia’s energy ministry explained that the country’s voluntary drop was a preventative action taken to help keep the oil market steady.
As a result of the banking crisis that followed the failure of two US bankers and culminated in Credit Suisse being rescued by Switzerland’s largest bank UBS, oil prices dropped to 15-month lows at the beginning of this month.
In anticipation of a likely drop in demand, Opec is adopting preventative measures, according to Amrita Sen, founder and director of Energy Aspects.
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