Saudi Arabia announces oil production cut of one million barrels per day

A arabia saudi committed to new cuts in its production of Petroleumsetting the tone for the meeting of the alliance of oil exporting countries OPEC+ this Sunday, the 4th, in Vienna, to outline a strategy to boost prices, which were hampered by uncertainty in relation to the global economy. The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and including the Venezuelaalong with its ten partners led by Russia, came together to come up with a common policy. Saudi Arabia’s Minister of Energy, Abdel Aziz bin Salman, said after the meeting that his country is committed to an additional cut of one million barrels per day (mbd) in its production starting in July, but that this reduction “may be extended”. Another important announcement made by the oil cartel is that the voluntary cuts in production adopted by nine countries under this agreement, totaling 1.6 mbd and which took effect in May, “will be extended until the end of 2024”, said the deputy prime minister. -Russian Minister, responsible for the portfolio of Energy, Alexander Novak, leaving the meeting. The meeting at OPEC headquarters started almost three hours later than scheduled, and negotiations were difficult between the 23 countries responsible for 60% of world oil production.

A key issue in the negotiations was the production base, as it serves to calculate the pumping quotas by country and thus configure a joint cut. The United Arab Emirates, which advocated greater production, managed to increase the base on which its pumping quota is calculated for 2024. According to the Bloomberg agency, this increase generated resistance from African countries such as Angola, Congo and Nigeria, whose quotas were reduced to the next year. These African countries are already producing at peak capacity, but are barely meeting their pumping targets and are now under additional pressure. Finally, “we were able to reach an agreement”, said Jean-Richard Itoua, Congolese Minister of Hydrocarbons, after the meeting. This meeting took place two months after several OPEC countries announced a voluntary cut in their production quotas to boost prices, a decision that took effect in May, but had a short-lived effect and failed to stop the fall in prices.

Despite oil prices having rebounded over the past two days, prices have fallen by 10% since the surprising announcement made in early April. Brent oil, a reference in Europe, is at US$ 76 a barrel, and American WTI is quoted at US$ 71, well below the levels reached in March 2022, at the beginning of the war in Ukraine, when they reached almost US$ 140 a barrel. Oil producers rallied at a time when the market is grappling with the impact of inflation, the monetary tightening of big banks, a less fluid than expected recovery in Chinese demand and various turmoil that has affected the financial system. “This move will add limited upward pressure to prices in the coming weeks, based on our projections,” Rystad Energy Vice President Jorge Leon said in a note.

*With information from AFP