Voluntary Cuts Aim to Support Market Stability
On Sunday, Saudi Arabia and other OPEC+ oil producers revealed voluntary cuts to their oil production, amounting to around 1.15 million barrels per day (bpd). The surprise move aims to support market stability.
Preparations for Ministerial Panel Meeting
It was largely expected that the group would virtually maintain its already agreed 2 million bpd cuts during the ministerial panel meeting, which includes Saudi Arabia and Russia, on Monday.
Reactions to Previous Output Cuts
Last October, OPEC+ agreed on output cuts of 2 million bpd from November until the end of the year. This decision angered Washington as tighter supply increased oil prices. The U.S. argued that lower prices were needed to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund the Ukraine war.
Details of Additional Voluntary Cuts
The unexpected voluntary cuts, beginning in May, will be in addition to those agreed upon in October. Saudi Arabia will cut output by 500,000 bpd, Iraq by 211,000 bpd, the UAE by 144,000 bpd, Kuwait by 128,000 bpd, Oman by 40,000 bpd, Algeria by 48,000 bpd, and Kazakhstan by 78,000 bpd.
Russia Extends Voluntary Cuts Until 2023
Russia's Deputy Prime Minister Alexander Novak announced on Sunday that Moscow would extend a voluntary cut of 500,000 bpd until the end of 2023. Moscow first introduced these cuts unilaterally in February after implementing Western price caps.
OPEC's Pre-emptive Steps Amid Market Challenges
The Saudi energy ministry said the voluntary cut was necessary to support oil market stability. Oil prices fell to 15-month lows earlier this month due to a banking crisis caused by the collapse of two U.S. lenders, leading to Credit Suisse being rescued by UBS. On Sunday, Amrita Sen, founder, and director of Energy Aspects, stated that OPEC is taking pre-emptive steps in case of any possible demand reduction.