Six members of Opec on 2 April announced additional “voluntary” cuts to their oil production targets from May to the end of this year. Opec’s core Gulf members Saudi Arabia, Iraq, UAE and Kuwait alongside Algeria and Gabon have pledged extra cuts totaling 1.04mn b/d. Add in non-Opec Kazakhstan and Oman as well as a previously-announced 500,000 b/d “cut” from Russia and the total hits 1.66mn b/d (see table 1).
Opec Catches Market Off Guard With ‘Voluntary’ Cuts
A decision by six Opec members to further cut output from May alongside non-Opec Russia, Kazakhstan and Oman took the market by surprise. Opec was already underproducing to the tune of 1mn b/d for March. With the latest “voluntary” cuts focused on the core Gulf countries who have been hitting their quotas, an additional 1mn b/d now looks set to be removed from the market. Saudi Arabia, in 2 April comments that were repeated the following day by the Opec Secretariat, says the additional cuts are “precautionary,” aimed at “supporting the stability of the oil market.” The move reinforces the impression that higher prices are the sort of stability they have in mind.
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Tables
1: Eight Opec+ Countries Have Pledged Additional 'Voluntary' Cuts Of 1.16mn b/d May 2023 (mn b/d)
2: Opec Wellhead Production, March 2023 (mn b/d, MEES Calculations)
REFERENCED MEES ARTICLES
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