Saudi Arabia and other OPEC+ oil producers announced further oil output cuts of around 1.16 million barrels per day on Sunday, ahead of a virtual meeting of an OPEC+ ministerial panel. The unexpected move takes the total volume of cuts by OPEC+ to 3.66 million bpd, equal to 3.7% of global demand. The pledges bring the total OPEC+ cut pledges to 3.66 million bpd. This comes after it was expected that the meeting would stick to the 2 million bpd of cuts already in place until the end of 2023. The voluntary cuts start from May and last until the end of the year.
Top OPEC producer Saudi Arabia said it would cut output by 500,000 bpd, and the UAE said it would cut production by 144,000 bpd. Iraq will reduce its production by 211,000 bpd, Kuwait announced a cut of 128,000 bpd, and Oman announced a cut of 40,000 bpd. Algeria said it would cut its output by 48,000 bpd, and Kazakhstan will cut output by 78,000 bpd. An OPEC+ source said Gabon would make a voluntary cut of 8,000 bpd, and not all OPEC+ members were joining the move as some are already pumping well below agreed levels due to a lack of production capacity.
The latest reductions could lift oil prices by $10 per barrel, according to the head of investment firm Pickering Energy Partners, while oil broker PVM said it expected an immediate jump once trading starts after the weekend. “I expect the market to open several dollars higher… possibly as much as $3,” said PVM’s Tamas Varga. “The step is unreservedly bullish.”
Last October, OPEC+ agreed to an output cut of 2 million bpd from November until the end of the year, a move that angered Washington as tighter supply boosts oil prices. The Biden administration said it sees the move announced by the producers on Sunday as unwise. “We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear,” a spokesperson for the National Security Council said.