OPEC extends oil production cuts through June

20 Mar 2024 , 11:58 PM

The de facto head of OPEC, Saudi Arabia, announced on Sunday that it would continue to reduce oil production through June, adding that it was doing so ‘in coordination with some’ other nations. Kuwait and the United Arab Emirates, two of Saudi Arabia’s allies, announced on Sunday that they will carry on with their cuts.

Predictably, the decision to maintain output cutbacks was made with the intention of supporting poor oil prices. There are specialists who predict that during the first half of this year, there will be more oil supply than demand. Prices could decline if reductions don’t continue.

In the words of Saudi Arabia, the action was ‘precautionary.’ According to a statement released by the kingdom and distributed by the official Saudi Press Agency, limiting oil production is done with the intention of ‘supporting the stability and balance of oil markets.’

The 1 million barrels per day that Saudi Arabia started reducing in July, according to them, ‘will be returned gradually, subject to market conditions.’

The United States and Guyana in particular are increasing their production of oil, and as a result, the Saudis are selling far less than they are capable of producing. 

Following its invasion of Ukraine in 2022, Russia—a member of OPEC+—has also succeeded in producing more oil than some observers had predicted.

The news on Sunday comes after the Saudis announced in January that they were abandoning a plan to boost the production capacity of Saudi Aramco, the country’s oil giant. Aramco had anticipated being able to produce 13 million barrels per day, which is a million more than it can do at the moment. Aramco had anticipated being able to produce 13 million barrels per day, which is a million more than it can do at the moment.

Furthermore, it appears that the Saudis have concluded—at least for the time being—that it is not really worth spending billions of dollars to be able to pump at rates much greater than the 9 million barrels per day that they are already producing.

Recently, there has been a gradual increase in oil prices, partially due to worries that the Middle Eastern countries that produce oil will be affected by the conflict between Israel and Hamas. At the end of last week, the price of the global standard, Brent crude, was approximately $83.55, the highest in roughly four months.

Rather, oil is being voluntarily removed from the market by OPEC and its allies. Along with the Saudis, a number of OPEC+ nations agreed to further cuts in November, including Kuwait, Iraq, and the United Arab Emirates. 

Analysts claim that in an emergency, the millions of barrels per day of output that these nations are keeping off the market may be utilized to cover the majority of possible interruptions.

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