Vienna, June 5, 2023 – OPEC+ leaders have agreed to cut oil production by 3.6 million bpd starting from July.
Saudi Arabia spearheaded the move with plans to cut its output by one million bpd from July.
The Arab oil superpower produces around 10 million bpd and it’s the only country in the OPEC+ zone with the capacity to store excess supply.
Prince Abdulaziz, Saudi’s energy minister described the decision as a “Saudi lollipop”.
In his words:“We wanted to ice the cake. We always want to add suspense. We don’t want people to try to predict what we do… This market needs stabilisation”
However, the cuts didn’t affect countries like Nigeria, Angola and Russia which the group lowered targets.
Nigeria has failed to meet up with its OPEC production quota of 1.75 million bpd. Last month, the country’s oil production stood at 1.65 million bpd.
Insecurity in the Niger Delta and oil theft have led to consistent shortfalls in oil production.
On the other hand, the UAE was allowed to raise its production by 200,000 bpd to 3.22 million bpd.
OPEC’s recent move comes on the heels of a slump in oil prices in May.
While the commodity’s price in April spiked by $9 in response to surprise cuts, prices have remained stagnant and necessitated a decision from OPEC and its allies.
OPEC+ is a group comprised of members of the Organization of Petroleum Exporting Countries and allies led by Russia.
The group is responsible for about 40% of global oil output. Its recent cut of 3.6 million bpd represents 3.6% of the global oil supply.
In a swift reaction to the cuts, early trading in the international markets has seen a $1 jump in oil prices.
The increase follows a 2% leap on Friday trading and seems consistent with OPEC+ plans to boost oil prices going into 2024.
Brent crude futures rose by $1.02 to $77.15 a barrel, a 1.3% jump, while U.S. West Texas saw a 1.4% increase to $72.76
Industry experts said OPEC+ moves indicate the group’s move to shore up the price of its exports.
According to Amrita Sen, co-founder of Energy Aspects, speaking to Reuters, said: “It is a clear signal to the market that OPEC+ is willing to put and defend a price floor,”
Beyond its July cuts, the group also pledged in their Vienna meeting on Sunday to further cut global production by 1.4 million bpd. (Reuters)
