Oil prices underwent a massive surge at the start of the week after a group of the world’s largest oil exporters unexpectedly announced crude output cuts on Sunday.
In what seems to be one of the more turbulent developments in the oil market, the Organization of Petroleum Exporting Countries and its non-OPEC allies, a group jointly referred to as OPEC+, announced a surprise oil production cut exceeding one million barrels per day on Sunday.
Calling it a precautionary measure aimed at supporting the stability of the global oil market, the powerful energy cartel said the staggering decision will come into effect from May until the end of the year, which would result in a deduction of 1.2 million barrels of crude oil a day, or more than 1 percent of total world supplies.
Sunday’s decision was also seen as a shock for the world, as the group of 23 oil-producing countries is expected to stick to the agreed production levels at its upcoming virtual meeting today.
According to the official statement, Saudi Arabia and Russia will cut 500,000 barrels per day, followed by Iraq, which will reduce crude production by 211,000 b/d. Relating to the matter, Moscow had first announced those cuts in February, after the introduction of western price caps. Further, the United Arab Emirates announced its oil cut of 144,000 b/d, followed by Kuwait at 128,000 b/d, Kazakhstan at 78,000 b/d, Algeria at 48,000 b/d, and Oman at 40,000 b/d. The details of the same have been announced in statements released from their respective governments.
It is pertinent to note that the cut comes in the aftermath of a persistent decline in oil prices following the collapse of the US’s Silicon Valley Bank and UBS’s forced takeover of Credit Suisse. However, after Sunday’s decision, the oil market touched a new high. In Asian trade, oil prices soared almost six percent on Monday morning, with West Texas Intermediate jumping by 5.74 percent to $80.01 a barrel and Brent strengthening at 5.67 percent to $84.42.
Sunday’s cut is in addition to a reduction announced last October
The voluntary cut comes on top of OPEC+ nations decision last year to limit their total oil production targets by 2 million barrels a day.
The powerful energy cartel in its statement released in October last year said, “In light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive, and pre-emptive, which has been consistently adopted by OPEC and non-OPEC Participating Countries in the Declaration of Cooperation, the Participating Countries decided to adjust downward the overall production by 2 mb/d from the August 2022 required production levels, starting November 2022 for OPEC and non-OPEC Participating Countries as per the attached table.”
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