(Reuters) – Members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies, united within OPEC+, agreed on Sunday to extend the current agreement to cut crude production until end of the second quarter to avoid oversupply.
Saudi Arabia, de facto leader of OPEC, said it would extend its production cut by 1 million barrels per day (bpd) until the end of June. Its total crude production will therefore amount to around 9 million bpd.
Russia will reduce its oil production and exports by an additional 471,000 bpd during the second quarter, in coordination with some OPEC+ members, Russian Deputy Prime Minister Alexander Novak said.
In November, OPEC+ agreed to voluntary cuts totaling around 2.2 million barrels per day (bpd) for the first quarter, led by Saudi Arabia.
“Russia created a surprise,” commented Giovanni Staunovo, analyst at UBS.
“If the Russian cuts are fully implemented, additional barrels will be taken off the market. So this is a surprise that no one expected and could push prices back up,” he said .
The price of Brent rose 2% to $83.55 per barrel on Friday. It shows an increase of more than 8% since the start of the year.
MESSAGE OF COHESION
OPEC+ member countries announced their cuts separately and the group later issued a statement confirming the total reduction of 2.2 million bpd. Saudi news agency SPA reported that the cuts would be adjusted based on market conditions.
“The decision sends a message of cohesion and confirms that the group is in no rush to restore supply volumes, suggesting that when this happens it will be gradual,” Jefferies analysts said in a note. .
Among the other members, Iraq said it would maintain its oil production decline of 220,000 bpd until June, the United Arab Emirates (UAE) by 163,000, Kuwait by 135,000, Algeria by 51,000 and Oman by 42,000.
Kazakhstan also confirmed that it would continue its voluntary cut of 82,000 bpd until the second quarter.
OPEC+ has implemented a series of production cuts since late 2022 to support the market in the face of increased production from the United States and other non-member producers and concerns about demand as major economies are facing high interest rates.
Oil prices remained supported due to growing geopolitical tensions linked to attacks by Yemen’s Houthis in the Red Sea, despite concerns over economic growth and high interest rates.
Sources told Reuters last week that OPEC+ would consider extending oil production cuts into the second quarter, with one saying it was a “likely” possibility. .
The oil demand outlook is uncertain for this year. OPEC expects another year of relatively strong demand growth of 2.25 million bpd, driven by Asia, while the International Energy Agency (IEA) forecasts much slower growth of 1.22 million bpd.
(Reporting Maha El Dahan in Dubai, Alex Lawler in London, Vladimir Soldatkin in Moscow, with Ahmad Ghadda, written by Yousef Saba; French version Claude Chendjou and Kate Entringer)
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