Iraq, Algeria, Saudi Arabia, the United Arab Emirates, Oman and Kuwait announced, on Sunday April 2, a reduction in their oil production from May, the oil giants of the Gulf evoking a “precautionary measure” aimed at stabilizing the market. This cut, which will last until the end of the year, means a total drop in production of around 1 million barrels per day (bpd), the largest reduction since October.
Riyadh will cut production by 500,000 bpd, Iraq by 211,000, the Emirates by 144,000, Kuwait by 128,000, Algeria by 48,000 and Oman by 40,000, these countries said via their news agencies respective officials. These reductions will take place “in coordination with some OPEC member countries (Organization of Petroleum Exporting Countries) and non-OPEC members”according to the Algerian Ministry of Energy.
Added to this is the announcement by the Russian Deputy Prime Minister for Energy, Alexander Novak, that Moscow would continue to reduce its crude oil production by 500,000 bpd until the end of the year. OPEC+ member Russia referred to a period of“uncertainty” on the black gold market, evoking a “responsible and preventive action”.
The announcements come on the eve of a videoconference meeting of the Joint Ministerial Monitoring Committee (JMMC), an OPEC+ panel. In February, JMMC members had “reaffirmed their commitment” towards the agreement decided in October, which had committed them to a drastic cut in their production of 2 million bpd to support prices. This was then the largest reduction since the start of the Covid-19 pandemic.
A snub for Washington
This new drop in production, which comes on top of that decided in October, comes despite calls from the United States to increase the number of bpd, while China, the most oil-intensive country, reopens its economy after s to be withdrawn during the Covid-19 pandemic. “As the global economy picks up, so does consumption. And that’s why we would like to see supply match demand.”, declared in March Jose Fernandez, US Undersecretary of State for Economic Affairs, on the sidelines of a conference on energy in Houston, Texas. The announcement of a cut in production in October was seen as a snub by Washington, which feared a surge in fuel prices against a backdrop of high inflation.
This time, according to a senior Saudi energy ministry official quoted by the SPA agency on Sunday, it is a “precautionary measure to support the stability of the oil market”. The Emirati Minister of Energy, Souhail ben Mohammed al-Mazrouei, spoke about “a voluntary initiative”, according to the official WAM news agency. The same terms were more or less taken up by the Algerian Ministry of Energy, which indicated that the drop was due to a “voluntary reduction” and one ” precautionary measure “according to the APS agency.
OPEC, created in 1960 and headquartered in Vienna since 1965, aims to “coordinate oil policies” of its members to ensure “fair and stable prices for producers”. It forms OPEC+ by including new allies, including Russia and Oman.