Saudi Arabia and other OPEC+ oil producing countries have announced further cuts in their production amounting to around 1.16 million barrels per day.
Saudi Arabia said it would cut output by 500,000 bpd while Iraq will reduce its production by 211,000 bpd, according to official statements.
UAE said 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 output by 78,000 bpd. Russia would extend a voluntary cut of 500,000 bpd until the end of 2023.
The development comes a day before a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which had been expected to stick to 2 million bpd of cuts already in place until the end of 2023.
Oil prices last month fell towards $70 a barrel, the lowest in 15 months, on concern that a global banking crisis would hit demand. Still, further action by OPEC+ to support the market was not expected after sources downplayed this prospect and crude recovered towards $80.
The Saudi energy ministry said the kingdom’s voluntary cut was a precautionary measure aimed at supporting the stability of the oil market. Last October, OPEC+ had agreed to an output cut of 2 million bpd from November until the end of the year.
According to Reuters’ calculations, the announcement made on Sunday results in a total reduction of 3.66 million barrels per day by the Organization of the Petroleum Exporting Countries (OPEC), Russia, and their allies. This reduction amounts to 3.7% of the global demand for oil.
The decision by OPEC+ and Saudi Arabia to cut oil production is expected to have a significant impact on oil prices. The move is aimed at reducing the global oversupply of oil and supporting prices, which have been under pressure. Analysts predict that the production cuts would lead to an immediate rise in oil prices.
Moreover, the impact of the production cuts on oil prices will depend on a variety of factors, including global demand, geopolitical tensions, and the pace of economic recovery from the pandemic. However, the decision by OPEC+ and Saudi Arabia to cut production is a positive step towards stabilizing the market and supporting oil prices in the long term.
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