Saudi Arabia and other major oil producers on Sunday (April 2) announced surprise cuts totaling 1.15 million barrels per day from May until the end of the year, a move that could raise prices worldwide.
Higher oil prices would help fill Russian President Vladimir Putin鈥檚 coffers as his country wages war on Ukraine and force Americans and others to pay even more at the pump amid worlwide inflation.
It was also likely to further strain ties with the United States, which has called on Saudi Arabia and other allies to increase production as it tries to bring prices down and squeeze Russia鈥檚 finances.
The Saudi Energy Ministry said its own reduction of 500,000 barrels per day would be made in coordination with some OPEC and non-OPEC members, without naming them. The cuts are in addition to a reduction announced last October that .
The ministry described the move as a 鈥減recautionary measure鈥� aimed at stabilizing the oil market. The cuts represent less than 5% of Saudi Arabia鈥檚 average production of 11.5 million barrels per day in 2022.
Iraq said it would reduce production by 211,000 barrels per day, the United Arab Emirates by 144,000, Kuwait by 128,000, Kazakhstan by 78,000, Algeria by 48,000 and Oman by 40,000. The announcements were carried by each country鈥檚 state media.
Russia鈥檚 Deputy Prime Minister Alexander Novak meanwhile said Moscow would extend a voluntary cut of 500,000 until the end of the year, according to remarks carried by the state news agency Tass. Russia had after Western countries imposed price caps.
All are members of the so-called OPEC+ group of oil exporting countries, which includes the original Organization of the Petroleum Exporting Countries as well as Russia and other major producers. There was no immediate statement from OPEC itself.
The cuts announced in October 鈥� 鈥� had come on the eve of U.S. midterm elections in which soaring prices were a major issue. President Joe Biden vowed at the time that there would be 鈥渃onsequences鈥� and Democratic lawmakers called for freezing cooperation with the Saudis.
Both the U.S. and Saudi Arabia denied any political motives in the dispute, with each saying it was focused on maintaining a healthy market price.
Since those cuts, oil prices have actually trended down. Brent crude, a global benchmark, was trading at around $80 a barrel at the end of last week, down from around $95 a barrel in early October, when the earlier cuts were agreed.
Analysts Giacomo Romeo and Lloyd Byrne at Jefferies said in a research note that the new cuts should allow for 鈥渕aterial鈥� reductions to OPEC inventory earlier than expected and could validate recent warnings from some traders and analysts that demand for oil is weakening.
Kristian Coates Ulrichsen, a Gulf expert at Rice University鈥檚 Baker Institute for Public Policy, said the Saudis are determined to keep oil prices high enough to fund a raft of ambitious mega-projects linked to Crown Prince Mohammed bin Salman鈥檚 .
鈥淭his domestic interest takes precedence in Saudi decision-making over relationships with international partners and is likely to remain a point of friction in U.S.-Saudi relations for the foreseeable future, even without taking into account the Russian dimension,鈥� he said.
Saudi Arabia鈥檚 state-run oil giant Aramco recently announced from last year. Profits rose 46.5% when compared to the company鈥檚 2021 results of $110 billion. Aramco said it hoped to boost production to 13 million barrels a day by 2027.
The decades-long U.S.-Saudi alliance has come under growing strain in recent years following , a U.S.-based journalist, and Saudi Arabia鈥檚 disastrous war with the Iran-backed Houthi rebels in Yemen.
As a candidate for president, Biden had vowed to make Saudi Arabia a 鈥減ariah鈥� over the Khashoggi killing, but as oil prices rose after his inauguration he backed off. He visited the kingdom last July in a bid to patch up relations, drawing criticism for with Crown Prince Mohammed.
Saudi Arabia has denied siding with Russia in the Ukraine war, even as it has cultivated closer ties with both Moscow and Beijing in recent years, unnerving its longtime allies in Washington. Last week, Aramco announced in China鈥檚 downstream petrochemicals industry.
The Associated Press
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