Saudi Arabia and other major oil producers on Sunday announced sudden cuts totaling 1.15 million barrels per day from May through the end of the year.
Rising oil prices are helping to fill the coffers of Russian President Vladimir Putin as Russia wages war on Ukraine, and consumers around the world are caught in an inflation fueled in part by the conflict. and forced to pay even more at the pump.
It is also likely to further strain relations with the United States, which is trying to squeeze Russia’s finances by lowering prices.
Saudi Arabia’s energy ministry said its own cut of 500,000 barrels per day would be coordinated with some OPEC and non-OPEC countries, but did not name them. The cuts are in addition to cuts announced last October that angered the Biden administration.
The ministry described the move as a “precautionary measure” aimed at stabilizing the oil market. This reduction represents less than 5% of Saudi Arabia’s average production of 11.5 million barrels per day in 2022.
Iraq said it would cut production by 211,000 bpd, the United Arab Emirates by 144,000 bpd, Kuwait by 128,000 bpd, Kazakhstan by 78,000 bpd, Algeria by 48,000 bpd and Oman by 40,000 bpd. The announcement was made by the national media of each country.
Meanwhile, Russian Deputy Prime Minister Aleksandr Novak said Moscow would extend 500,000 voluntary cuts until the end of the year, according to statements reported by the state-run TASS news agency. Russia announced unilateral price cuts in February after Western countries imposed price caps.
All countries are members of the OPEC+ group of oil exporting countries, including the former Organization of the Petroleum Exporting Countries and Russia and other major producers. There was no immediate statement from OPEC itself.
The cut of about 2 million barrels per day announced in October came on the eve of the US midterm elections, when high prices became a major issue. Vowed, Democratic lawmakers called for a freeze on cooperation with Saudi Arabia.
Both the United States and Saudi Arabia have denied political motives for the conflict, saying they are focused on maintaining healthy market prices.
Saudi Arabia prioritizes economic reform plan
Since these cuts, crude oil prices have actually been on a downward trend. Global benchmark Brent crude is trading at around US$80 a barrel over the weekend, down from around US$95 in early October after earlier cuts were agreed.
Analysts Giacomo Romeo and Lloyd Byrne at investment firm Jefferies said in a research note that the new cuts would allow for a “substantial” reduction in OPEC inventories sooner than expected, one of which is weakening oil demand. It may be possible to verify recent warnings from traders and analysts at the department, he said.
Saudi Arabia will fund many ambitious megaprojects related to Crown Prince Mohammed bin Salman’s Vision 2030 plan, said Christian Coates-Ulrissen, a Gulf expert at the Baker Institute for Public Policy at Rice University. He said he was determined to keep oil prices high enough to .
“This domestic interest takes precedence in Saudi decision-making over relations with international partners and is likely to remain a point of friction in US-Saudi relations in the near future, even without considering the Russian side.” It’s high quality,” he said.
Saudi Arabia’s state oil giant Aramco recently announced a record profit of US$161 billion (217 billion Cdn) from last year. Earnings increased 46.5% compared to the company’s 2021 result of his $110 billion (148 billion Cdn). Aramco said it hoped to increase production to 13 million barrels per day by 2027.
The 2018 killing of Saudi dissident and US-based journalist Jamal Khashoggi and the devastating war between Saudi Arabia and Iran-backed Houthi rebels in Yemen. As a result, the decades-old US-Saudi alliance has been under increasing strain in recent years.
As a presidential candidate, Mr. Biden vowed to make Saudi Arabia a “pariah” over the murder of Mr. Khashoggi, but he backed off as oil prices rose after taking office. He traveled to the kingdom in July last year to mend ties, drawing criticism for shoving fists with Crown Prince Mohammed bin Salman.
Saudi Arabia has denied taking Russia’s side in the Ukraine war despite having forged closer ties with both Russia and Beijing in recent years, unnerving Washington’s longtime ally. Last week, Aramco announced a multi-billion dollar investment in China’s downstream petrochemical industry.
