As a “precautionary step” to maintain market stability, Saudi Arabia and other OPEC+ oil producers have proposed voluntary production cutbacks of roughly 1.15 million barrels per day (bpd). When the ministerial panel, which includes Saudi Arabia and Russia, meets electronically on Monday, it was widely assumed that the 23-nation group will maintain the 2 million bpd cutbacks previously agreed upon. The Organization of the Petroleum Exporting Countries (OPEC) and 10 allies led by Russia decided in October to decrease production by 2 million bpd beginning in November. This decision infuriated the United States government.
The United States has claimed that lower prices are necessary for the world’s economy to flourish and to stop Russian President Vladimir Putin from raking in more money to fund the conflict in Ukraine. In addition to the reductions agreed upon in October, a new round of voluntary layoffs began on Sunday, with effects beginning in May. Official indications indicate that Iraq will lower production by 211,000 bpd and that Riyadh will limit output by 500,000 bpd. The United Arab Emirates has pledged to reduce output by 144,000 bpd, Kuwait by 128,000 bpd, Oman by 40,000 bpd, and Algeria by 48,000. In addition, Kazakhstan will reduce production by 78,000 bpd. Through the end of 2023, Russia will voluntarily reduce oil production by 500,000 bpd, according to the country’s deputy prime minister. As Western pricing restrictions went into effect in February, Russia announced such reductions on its own.
U.S. officials had claimed that Russia’s alliance with the other OPEC+ members was deteriorating after its unilateral cutbacks, but Russia’s action on Sunday demonstrates that the partnership is still strong. According to the Saudi News Agency, an official from the Saudi energy ministry “emphasized that this is a precautionary action aimed at maintaining the stability of the oil market.” In the wake of the failure of two American institutions and the subsequent bailout of Credit Suisse by Switzerland’s largest bank, UBS, oil prices dropped to 15-month lows last month. Amrita Sen, founder and head of Energy Aspects, stated on Sunday that “OPEC is taking pre-emptive preparations in case of any probable demand decline.”
