Saudi Arabia, Opec+ producers announce surprise oil output cuts

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Saudi Arabia and other Opec+ oil producers on Sunday announced voluntary cuts to their production amounting to around 1.15 million barrels per day (bpd) in a surprise move they said was aimed at supporting market stability.

The group had been largely expected to stick to its already agreed 2m bpd cuts when its ministerial panel, which includes Saudi Arabia and Russia, meets virtually on Monday.

Last October, Opec+, which comprises the Organisation of Petroleum Exporting Countries (OPEC) and allies led by Russia, agreed on output cuts of 2m bpd from November until the end of the year, angering Washington as tighter supply boosts 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 Ukraine war.

Sunday’s unexpected voluntary cuts, which start from May, come in addition to the ones already agreed upon in October.

Riyadh said it would cut output by 500,000 bpd while Iraq will reduce its production by 211,000 bpd, according to official statements.

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 will also cut output by 78,000 bpd.

Russia’s Deputy Prime Minister Alexander Novak also said on Sunday that Moscow would extend a voluntary cut of 500,000 bpd until the end of 2023. Moscow announced those cuts unilaterally in February following the introduction of Western price caps.

After Russia’s unilateral reductions, US officials said its alliance with other Opec members was weakening, but Sunday’s move shows the cooperation is still strong.

The Saudi energy ministry said in a statement that the kingdom’s voluntary cut was a precautionary measure aimed at supporting the stability of the oil market.

Oil prices fell to 15-month lows earlier this month in response to the banking crisis that followed the collapse of two US lenders and resulted in Credit Suisse being rescued by Switzerland’s biggest bank UBS.

“Opec is taking pre-emptive steps in case of any possible demand reduction,” Amrita Sen, founder and director of Energy Aspects, said on Sunday.

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