DUBAI, April 2 (Reuters) – Saudi Arabia and other OPEC+ oil producers on Sunday announced a further cut in oil production of around 1.16 million barrels per day, in a surprise move that said by analysts that caused an immediate increase in prices and called the United States bad. .
The pledges bring the total number of cuts by OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, to 3.66 million bpd according to Reuters calculations, equivalent to 3.7% in global demand.
Sunday’s development comes a day before a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which is expected to maintain the 2 million bpd of cuts already in place until the end of 2023.
Oil prices last month fell to $70 per barrel, the lowest in 15 months, due to concerns that the global banking crisis will hit demand. However, further OPEC+ action to support the market is not expected after sources downgraded this prospect and crude recovered to $80.
The latest cuts could push oil prices up to $10 a barrel, the head of investment firm Pickering Energy Partners said on Sunday, while oil broker PVM said it expected an immediate jump once the trading starts after the weekend.
“I expect the market to open several dollars higher … possibly up to $3,” said Tamas Varga of PVM. “The step is unquestionably strong.”
Top OPEC producer Saudi Arabia said it would cut output by 500,000 bpd. The Saudi energy ministry said the kingdom’s voluntary reduction was a precautionary measure aimed at supporting the stability of the oil market.
“OPEC takes pre-emptive measures when there is a possible drop in demand,” said Amrita Sen, founder and director of Energy Aspects.
In October, OPEC+ agreed to an output cut of 2 million bpd from November until the end of the year, a move that angered Washington as tighter supplies pushed up oil prices.
The US argues that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from getting more revenue to fund the war in Ukraine.
The Biden administration said it saw the move announced by producers on Sunday as unwise.
“We don’t think the cuts are good at this time because of the uncertainty in the market — and we’ve made that clear,” a National Security Council spokesman said.
STARTING IN MAY
The voluntary cuts will begin in May and last until the end of the year. Iraq will reduce its production by 211,000 bpd, according to an official statement.
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 output by 48,000 bpd. Kazakhstan will also cut output by 78,000 bpd.
Russian 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 the cuts unilaterally in February after introducing price caps in the West.
An OPEC+ source said Gabon will make a voluntary cut of 8,000 bpd and not all OPEC+ members will participate in the move because some are already pumping below the agreed level due to lack of production capacity.
After Russia’s unilateral reductions, US officials said its alliance with other OPEC members was weakening, but Sunday’s move showed cooperation was still strong.
Reporting by Maha El Dahan, Ahmed Rasheed, Dmitry Zhdannikov and Adam Makary, additional reporting by Alex Lawler, Ahmad Ghaddar and Gary McWilliams, writing by Alex Lawler, Editing by Hugh Lawson, Sharon Singleton and Philippa Fletcher
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