Major OPEC+ producers announce surprise production cuts through 2023
A number of OPEC+ members have pledged oil production cuts totalling 1.16 million b/d for the rest of this year, raising supply concerns amid optimism over China's growing oil demand.
PHOTO: Flag of OPEC. Getty Images
OPEC+, which includes OPEC members and allied producing countries such as Russia, says that its voluntary cuts are intended to maintain "market stability" after the financial and commodity markets were shaken by the banking turmoil in the US and Europe.
The group's largest oil producer, Saudi Arabia, has committed to a 500,000-b/d output cut from May to 2023-end, according to the country's state-owned media agency. “The Ministry of Energy official emphasised that this is a precautionary measure aimed at supporting the stability of the oil market,” Saudi Press Agency has reported.
Russia will extend its 500,000 b/d oil output cut through to the end of this year, its official media agency TASS said, citing its Deputy Prime Minister Alexander Novak. According to Novak, Russia will calculate the output cut based on its average production level for February.
Russian oil production was cut by 500,000 b/d in March, and this cut was then extended to the end of June. TASS reported that Novak called the output cut "reasonable and preemptive" considering the high volatility and instability in the oil market after the turmoil in the banking sector.
Several other OPEC+ members have also joined Saudi Arabia and Russia to reduce production levels until 2023. The UAE's oil minister Suhail bin Mohammed Al Mazrouei announced a voluntary production cut of 144,000 b/d via the UAE's official news agency.
Iraq has pledged to reduce production by 211,000 b/d, Kuwait by 128,000 b/d, Oman by 40,000 b/d and Algeria by 48,000 b/d, according to their respective state-owned press agencies. Kazakhstan's oil ministry has agreed to cut production by 78,000 b/d in cooperation with the OPEC+ alliance.
The voluntary production cuts announced by OPEC+ will be in addition to the 2 million b/d reduction announced at last year's October meeting. As a whole, the group has decreased its oil production by 3.66 million b/d this year and Reuters estimates that this amounts to 3.7% of global oil demand.
The International Energy Agency's March report showed that 19 oil-producing nations collectively produced 38.38 million b/d in February this year, which was 1.72 million b/d below their target. Further declines of 3.36 million b/d would further cut the group's supply and potentially global supply constraints.
By Konica Bhatt
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