DUBAI, April 2 (Reuters) – Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil output cuts of around 1.16 million barrels per day, in a surprise move analysts said was due to an immediate rise in prices and concerns the United States called. .
The pledges bring the total number of cuts by OPEC+, which includes the Organization of the Petroleum Exporting Countries with Russia and other partners, to 3.66 million bpd according to Reuters calculations, equal to 3.7% of global demand.
Sunday’s development comes ahead of a virtual meeting of the OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which was expected to stick with the 2,000 bpd cuts already in place until the end of 2023.
Oil prices fell last month towards $70 a barrel, a 15-month low, due to concerns that the global banking crisis would prompt demand. However, further action by OPEC+ to support the market is not expected after sources were optimistic about this and crude oil recovered to $80.
The latest reductions could lift the price of oil by $10 per barrel, the head of investment firm Pickering Energy Partners said on Sunday, while oil sector PVM said it expected immediate trading to begin after the weekend.
“I expect the market to open several dollars higher … perhaps as much as $3,” said Tamas Varga PVM. “The degree is simply cattle.”
Top OPEC producer Saudi Arabia said it would cut output by 500,000 bpd. The Saudi energy ministry said the kingdom’s voluntary reduction was a precautionary measure aimed at maintaining the stability of the oil market.
“OPEC is taking pre-emptive steps in the event of any reduction in demand,” Amrita Sen, founder and director of Energy Outlook, said.
Last October, OPEC+ agreed to cut output by 2 million bpd from November until the end of the year, a move that angered Washington as tighter supplies boost oil prices.
The US has argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund the war in Ukraine.
The Biden administration said it views the move by producers on Sunday as unwise.
“We think the cuts are appropriate at this time given the uncertainty of the market – and we’ve made that clear,” a spokesman for the National Security Council said.
It begins in May
Volunteering takes place from May and lasts until the end of the year. Iraq will reduce its production by 211,000 bpd, according to an official statement.
The UAE said it would cut production by 144,000 bpd, Kuwait announced a cut of 128,000 bpd, while Oman announced a cut of 40,000 bpd, and Algeria said it would cut its output by 48,000 bpd. Kazakhstan’s output will also be cut by 78,000 bpd.
Russian Deputy Prime Minister Alexander Novak also said on Sunday that Moscow would extend the voluntary cut of 500,000 bpd until the end of 2023. Moscow unilaterally cut those in February after the introduction of Western price caps.
An OPEC+ source said Gabon is willing to cut 8,000 bpd and not all OPEC+ members will move as some are already pumping well below costs due to a lack of production capacity.
After Russia’s unilateral reductions, US officials said its partnership with other OPEC members was weakening, but Sunday’s move showed cooperation is still strong.
Reporting by Maha El Dahan, Ahmed Rasheed, Dmitry Zhdannikov and Adam Makary, with additional reporting by Alex Lawler, Ahmad Ghaddar and Gary McWilliams, writing by Alex Lawler, editing by Hugh Lawson, Sharon Singleton and Philippa Fletcher.
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