OPEC+ Announces Surprise Oil Production Cuts

  • The unexpected move comes ahead of Monday’s meeting of ministers
  • Total OPEC+ cut commitments now stand at 3.66 million bpd
  • Oil could hit $10 a barrel – Analyst

DUBAI, April 2 (Reuters) – Saudi Arabia and other OPEC+ oil producers announced on Sunday they would cut further oil output by about 1.16 million barrels per day, a surprise move analysts said would immediately push prices higher and the U.S. said was unwelcome. .

The pledges bring the total volume of cuts by OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, to 3.66 million bpd, according to Reuters calculations, equivalent to 3.7% of global demand.

Sunday’s growth comes a day ahead of a virtual meeting of the OPEC+ ministerial group, which includes Saudi Arabia and Russia, and it was expected to stick to an already 2 million bpd cut until the end of 2023.

Surprising production cuts

Oil prices fell to $70 a barrel last month, a 15-month low, on concerns that the global banking crisis will hurt demand. However, after sources downplayed the prospect and crude oil rebounded to $80, no further action by OPEC+ is expected to support the market.

The latest cut could lift oil prices by $10 a barrel, the head of investment firm Pickering Energy Partners said on Sunday, while oil broker PVM said it expects an immediate improvement when trading resumes after the weekend.

“I expect the market to be several dollars higher.

Top OPEC producer Saudi Arabia said it would cut production by 500,000 bpd. The Saudi Arabian Energy Ministry said the kingdom’s voluntary reduction was a precautionary measure aimed at supporting the stability of the oil market.

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“OPEC is taking proactive measures in case of demand cuts,” said Amrita Sen, founder and director of Energy Aspects.

Last October, OPEC+ agreed to a production cut of 2 million bpd from November to the end of the year, angering Washington as tight supplies push up oil prices.

The U.S. has argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from raising more revenue to fund the war in Ukraine.

The Biden administration called the move, announced by producers on Sunday, unwise.

“Given the market uncertainty we don’t think cuts are a good idea at this time – we’ve made that clear,” a spokesman for the National Security Council said.

May begins

The voluntary cuts will begin in May and last until the end of the year. Iraq will cut its production by 211,000 bpd, according to an official statement.

The UAE announced a production cut of 144,000 bpd, Kuwait a 128,000 bpd cut, Oman a 40,000 bpd cut and Algeria a 48,000 bpd cut. Kazakhstan will also cut production by 78,000 bpd.

Russia’s Deputy Prime Minister Alexander Novak said on Sunday that Moscow would extend the voluntary cut of 500,000 bpd until the end of 2023. Moscow unilaterally announced those cuts in February following the introduction of Western price caps.

An OPEC+ source said that Gabon would voluntarily cut 8,000 bpd and that not all OPEC+ members had joined the move, with some falling below the already agreed levels due to lack of production capacity.

After Russia’s unilateral cuts, US officials said its alliance with other OPEC members was weakening, but Sunday’s move showed cooperation was still strong.

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(Reporting by Maha El Dahan, Ahmad Rasheed, Dmitry Zhdanikov and Adam Makari, Additional reporting by Alex Lawler, Ahmed Khader and Gary McWilliams) Writing by Alex Lawler Editing by Hugh Lawson, Sharon Singleton and Philippa Fletcher

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