DUBAI: Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil production cuts of about 1.16 million barrels a day.
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The pledges bring the total volume of cuts from OPEC+, which groups the Organization of Petroleum Exporting Countries with Russia and other allies, to 3.66 million barrels a day, or 3.7% of global demand, according to Reuters calculations.
Sunday's development comes a day ahead of a virtual meeting of the OPEC+ ministerial body, which includes Saudi Arabia and Russia, which is expected to stick with the already existing 2 million bpd cuts through the end of 2023.
Oil prices fell to $70 a barrel for the last month, a 15-month low, on fears the global banking crisis could hurt demand. However, no further action from OPEC+ was expected to support the market after sources dismissed forecasts and oil prices surged to $80. The recent declines could push oil prices up $10 a barrel, the head of investment firm Pickering Energy Partners said on Sunday, while oil brokerage PVM said it expected an immediate surge when trading resumes after the weekend.
“I expect the market to open a few dollars higher...probably to $3,” said PVM's Tamas Varga, “the pace is unconditionally optimistic.”
Saudi Arabia, OPEC's largest producer, announced it would cut production by 500,000 barrels a day.The Ministry of Energy of Saudi Arabia said the kingdom's voluntary downsizing was a precautionary measure to support oil market stability.
"OPEC is taking preventive measures in the event of a potential demand drop," said Amrita Sen, founder and director of Energy Aspects.
Last October, OPEC+ agreed to cut production by 2 million barrels a day from November through the end of the year, infuriating Washington as lower supplies drove oil prices higher.
United StatesHe argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from generating more revenue to fund the war in Ukraine. The Biden administration said it viewed the decision announced by producers Sunday as rash.
"We believe that the cuts are not desirable at this time given the uncertainty in the market - and we have made that clear," said a spokesman for the National Security Council.
Beginning of May
The voluntary reduction starts in May and lasts until the end of the year. Iraq will cut production by 211,000 barrels a day, according to an official statement.
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The United Arab Emirates said it will cut production by 144,000 barrels per day, Kuwait announced a 128,000 barrels per day cut, while Oman announced a 40,000 barrels per day cut and Algeria said it would cut production by 48,000 barrels per day will cut. Kazakhstan will also cut production by 78,000 barrels per day. Russian Deputy Prime Minister Alexander Novak also said on Sunday that Moscow would extend the voluntary cut by 500,000 OPEC+ members and would not go along with that decision as some are already pumping well below agreed levels due to capacity constraints.After Russia's unilateral cuts, US officials said its alliance with other OPEC members was waning, but Sunday's decision shows the cooperation remains strong.