The Gulf oil giants are leading coordinated production cuts, calling it a “precautionary measure” aimed at market stability.
Saudi Arabia and other OPEC+ oil producers have announced voluntary production cuts amounting to about 1.15 million barrels per day (bpd), calling this a “precautionary measure” aimed at market stability.
The group of 23 countries was largely expected to adhere to the already agreed 2 million bpd cuts when its ministerial panel, which includes Saudi Arabia and Russia, convenes virtually on Monday.
In October, OPEC+, made up of the Organization of the Petroleum Exporting Countries and 10 allies led by Russia, agreed to cut production by 2 million bpd from November, angering Washington that tighter supply is pushing up oil prices.
The United States has argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund Ukraine’s war.
Sunday’s unexpected voluntary cuts, effective from May, come on top of those already agreed in October.
Riyadh said it would cut production by 500,000 barrels per day, while Iraq will cut its production by 211,000 barrels per day, according to official statements.
The United Arab Emirates said it would cut production by 144,000 barrels per day, Kuwait announced a cut of 128,000 barrels per day, while Oman’s cut will be 40,000 barrels per day and Algeria’s cut will be 48,000 barrels per day. Kazakhstan will also cut production by 78,000 barrels per day.
Russia’s deputy prime minister said Moscow would extend a voluntary cut of 500,000 barrels per day until the end of 2023.
Moscow announced those cuts unilaterally in February after the introduction of Western price caps.
After Russia’s unilateral cuts, US officials said the alliance with other OPEC+ members was weakening, but Sunday’s move shows that cooperation is still strong.
An official from the Saudi energy ministry stressed that this is a precautionary measure to support the stability of the oil market, the official Saudi news agency said.
Oil prices fell to a 15-month low last month in response to the banking crisis that followed the collapse of two US lenders and led to Credit Suisse being bailed out by Switzerland’s largest bank, UBS.
“OPEC is taking preemptive action in the event of a possible reduction in demand,” Amrita Sen, founder and director of Energy Aspects, said on Sunday.