Saudi Arabia and other members of the oil-producing group OPEC+ announced on April 2 that they will be cutting their output by about 1.15 million barrels per day (bpd), a move expected to cause an immediate rise in prices.
According to its state news agency, Saudi Arabia will voluntarily cut its oil production by 500,000 bpd from May to the end of 2023. The Middle Eastern kingdom’s energy official described the decision as a “precautionary measure” aimed at “supporting the stability of the oil market.”
Russia, which has already been reducing oil production by 500,000 bpd since March in response to Western countries’ price caps designed to curtail the Kremlin’s ability to finance its military campaign in Ukraine, also confirmed that it will be extending the original three-month cut by another six months.
“As responsible and preemptive actions, Russia will extend its voluntary oil production reduction by 500,000 barrels a day until the end of 2023 from the average production level in February established in conformity with independent sources,” Russian Deputy Prime Minister Alexander Novak said, per state-owned TASS.
Other OPEC+ members also followed suit. Iraq announced a cut of 211,000 bpd, followed by the United Arab Emirates (144,000 bpd), Kuwait (128,000 bpd), Kazakhstan (78,000 bpd), Algeria (48,000 bpd), and Oman (40,000 bpd).
The collaborative production cuts come after oil prices in March fell toward a 15-month low at $70 a barrel, largely driven by worries that the ongoing global banking crisis would—as did the 2008–2009 financial crisis—spur a severe drop of global oil demand.
West Texas Intermediate, a U.S. benchmark for crude oil, in mid-March fell below $70 a barrel in the wake of the collapses of California-based Silicon Valley Bank and New York’s Signature Bank. International benchmark Brent Crude also dropped to its lowest point since December 2021, $71.46 per barrel.
Both benchmarks rose this week as concerns of a potential global banking meltdown eased.
By Bill Pan
