OPEC+ cuts oil production by more than one million barrels until 2024
By surprise. This is how the international community has been taken by surprise by OPEC+'s announcement of a new reduction in oil production. The organisation assures that it is a measure aimed at stabilising prices, although everything indicates that this reduction will cause them to rise significantly. Above all, bearing in mind that in October last year, OPEC+ announced a reduction of two million barrels of oil per day (bpd) until the end of 2022, something that did not sit well in the United States. The reason for this is that the White House considers it better to lower prices in order to promote economic growth and reduce the profits that Russia obtains from oil.
Riyadh and Moscow will reduce their production by 500,000 barrels of oil per day, to which must be added Kuwait's cut of 180,000 bpd and Iraq's 211,000 bpd. Oman and Algeria will also reduce their production, although with less impact, as the reduction does not exceed 50,000 bpd. The Saudi Arabian Ministry of Energy defends the decision as a measure to stabilise the oil market. As does the United Arab Emirates: "This voluntary initiative is a precautionary measure taken to ensure market balance," says the Emirati energy minister, Suhail bin Mohammed Al-Mazrouei.
However, some experts believe that this decision is far from stabilising oil prices, which could rise in the short term. At least that is the view of Dan Pickering, co-founder of the investment firm Pickering Energy Partners, who assures that "we will probably get a $10 (per barrel) move in crude oil". This aspect is one of the main concerns in Washington, which after Russia's unilateral reductions in February expected a weakening of its relations with some OPEC+ allies.
Saudi Arabian and Emirati agencies claim that this decision is not a reversal but an implementation of an idea already agreed in October 2022. "This voluntary cut is in addition to the production reduction agreed at the 33rd Ministerial Meeting", and they call it a "precautionary measure". Iraq's oil ministry has also stated that this is a necessary decision to "address the challenges facing the global oil market and to achieve a balance between supply and demand". They add that it has been done "in a way that does not contradict the previous policy of reduction".
It is also assured that the measure has been taken "in coordination with some other participating countries" of OPEC+, which has not prevented surprise in many Western countries. And the first reactions have not been long in coming. One-month futures on Brent crude, the North Sea benchmark, have risen by 5%, reaching 84 dollars, the highest level in just over a month. On the other hand, US West Texas crude oil is above 79 dollars, also up five percentage points.
The explanation for this rise, according to Vivek Dhar, energy analyst at CBA, in statements to Reuters, is that "the participation of the largest OPEC+ members suggests that compliance with production cuts may be stronger than in the past". This means that "oil markets could potentially see around one per cent of global oil supply or more being reduced from May". Hence, both the US and European countries view this decision with both puzzlement and fear for its consequences.
