Moscow, Riyadh and several other OPEC+ members on Sunday announced extensions to oil production cuts first announced in 2023 as part of a deal among oil producers to bolster prices after economic uncertainty.
The plan to extend the cuts until mid-2024 comes on top of previous cuts in both oil production and exports as some of the world’s biggest energy producers scramble to raise market rates.
Saudi Arabia’s energy ministry said it would cut production by one million barrels per day (bpd) from April to June (2nd quarter), while Russia announced cuts of 471,000 bpd in the second quarter.
“To maintain market stability, these additional cuts will be gradually restored depending on market conditions,” Russian Deputy Prime Minister Alexander Novak said after the end of the second quarter.
The measures for both countries are in addition to the 500,000 bpd cut announced in April 2023, which runs until the end of 2024.
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The United Arab Emirates, Kuwait, Iraq and Kazakhstan followed suit, saying they would extend existing voluntary cuts until the end of June.
The 22-nation OPEC+ oil alliance has implemented supply cuts of more than five million barrels per day (bpd) from the end of 2022.
Russia’s invasion of Ukraine in 2022 sent oil prices soaring to $140, boosting profits across the industry.
The West has sought to target Moscow’s energy exports under sanctions imposed over the Kremlin’s attack on Ukraine, forcing Russia to increase supplies to countries such as China and India.
Oil prices rose on Friday in anticipation of the new extension. US West Texas Intermediate (WTI) rose above $80 for the first time since November, while North Sea Brent hit a monthly high of $83.55.
Fragile unity
In 2016 the 13-member crude-producing OPEC alliance led by Riyadh formed OPEC+ with an additional 10 countries, including Moscow, to ease prices after competition from the US.
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“The whole point of OPEC+ was to create a broader group so that there is no need for voluntary cuts,” Rystad Energy economist Jorge Leon told AFP, “Everyone is contributing and no one is going it alone.”
But for almost a year, Saudi Arabia has done without unanimity because of the lack of agreement among members.
The voluntary cuts, Leon warned, are a “clear signal that OPEC+ cohesion is not great.”
In a surprise move in December, Angola pulled out of the alliance over a dispute over a decision to cut production, backed by heavyweight Riyadh.
For Leon, “more countries will need to contribute to official cuts” as part of a joint deal or risk an increasingly faltering alliance.
Source: AFP