(Riyadh) Iraq, Algeria, Saudi Arabia, the United Arab Emirates, Oman and Kuwait announced oil production cuts as early as May on Sunday, with the Gulf oil giants citing a “precautionary measure” aimed at stabilizing the market.
This cut, which will begin in May and last until the end of the year, means a total drop in production of around one million barrels per day (bpd), the largest reduction since October.
Riyadh will cut production by 500,000 bpd, Iraq by 211,000 bpd, the Emirates by 144,000 bpd, Kuwait by 128,000 bpd, Algeria by 48,000 bpd and Oman by 40,000 bpd, each country said through their respective official press agencies.
These cuts will all take place from May until the end of 2023. They are taking place “in coordination with certain OPEC and non-OPEC countries”, according to the Algerian Ministry of Energy.
Added to this was the announcement by the Deputy Prime Minister for Energy, Alexander Novak, that Russia would continue to reduce its crude oil production by 500,000 bpd until the end of the year.
OPEC member Moscow referred to a period of “uncertainty” in the black gold market, citing “responsible and preventive action.”
These announcements come on the eve of a meeting by videoconference of the Joint Ministerial Monitoring Committee (JMMC), a panel of the Organization of the Petroleum Exporting Countries and their allies (OPEC).
In February, JMMC members had “reaffirmed their commitment” to the agreement reached in October, which committed them to a drastic production cut of two million bpd to support prices.
This was then the largest reduction since the start of the COVID-19 pandemic.
This new production cut, which comes on top of the one decided in October, comes despite calls from the United States to increase the number of bpd, against a backdrop of galloping inflation while China, the most gold-hungry country black, is reopening its economy after turning inward during the COVID-19 pandemic.
“Since the global economy is picking up (after COVID-19, editor’s note), so is consumption. And that’s why we would like to see supply match demand,” Jose Fernandez, U.S. Undersecretary for Economic Affairs, said in March on the sidelines of the conference on CERAWeek Energy in Houston, Texas.
The announcement of a cut in production in October was seen as a snub by Washington, which feared a surge in fuel prices against a backdrop of high inflation.
This time, according to a senior Saudi energy ministry official, quoted by the Saudi agency SPA on Sunday, it is a “precautionary measure aimed at supporting the stability of the oil market”.
Emirati Energy Minister Souhail bin Mohammed al-Mazrouei spoke of “a voluntary initiative”, according to the official Emirati news agency WAM.
The same terms were more or less echoed by the Algerian Ministry of Energy, which said the drop was a “voluntary reduction” and a “preventive measure”, according to the Algerian agency APS.
OPEC, established in 1960, and headquartered in Vienna since 1965, aims to “coordinate the oil policies” of its members to ensure “fair and stable prices for producers”. It forms OPEC by including new allies, including Russia and Oman.
