Ajit Karn
Saudi Arabia and other Organization of the Petroleum Exporting Countries (OPEC) Plus oil producers have announced additional production limits of approximately 1.16 million barrels per day.
State media reported that from May until the end of 2023, Riyadh, Saudi Arabia’s capital and primary financial center, will reduce oil production by 500,000 barrels per day (BDP).
According to media, the Saudi official emphasized in a statement released by the Saudi Press Agency (SPA) that this is a precautionary measure intended to support the stability of the oil market.
This voluntary cut is in addition to the production limit agreed to at the 33rd OPEC and non-OPEC Ministerial Meeting on October 5, 2022.
The Washington Post reported that the move came as a surprise because OPEC Plus had stated that they had no plans to alter their policies, but this announcement stunned everyone.
In February, the last month for which official output figures are available, the alliance produced nearly two million barrels below its supply target. Ha Nguyen, a global oil analyst at S&P Global Commodity Insights, stated, “We expect supply shortages to continue.”
Since the Russian invasion of Ukraine more than a year ago, there have been persistent reports that Russia is struggling to maintain production without the assistance of Western service companies that have wound down their operations.
In recent months, Saudi production has also been below the Organization of the Petroleum Exporting Countries’ production quota.
According to The Washington Post, Brazil, Canada, Guyana, Norway, and the United States are supplying the 100-million-barrel-a-day global market. Each nation is increasing its energy production.
Nonetheless, the OPEC Plus action has symbolic significance at a time when oil prices are a third lower than they were immediately following Russia’s military operation in Ukraine in February of last year. OPEC Plus members may be reacting to growing fears of a recession later this year in the aftermath of the failure of a number of American and European banks and central bankers’ ongoing efforts to contain inflation. Strikes in France, including those at refineries, have also reduced oil demand.
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U.S. Treasury spokeswoman Adrienne Watson stated, “At this time, we do not believe that cuts are prudent due to market volatility.” According to a report in the Washington Post, the National Security Council stated, “We’re focused on prices for American consumers, not barrels, and prices have dropped significantly since last year.”
