The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group met on Monday and made the shock new production cuts official, with some of the major producers in OPEC and non-OPEC, including Russia, pledging a total of 1.66 million barrels per day (bpd) of cuts on top of the ones running since November last year.
The meeting, which just days before was expected to be a routine no-news affair, was only routine in acknowledging the cuts announced on Sunday, which sent oil prices rallying by more than 6% early on Monday with WTI Crude topping $80 a barrel again.
The meeting noted the voluntary production adjustment announced on Sunday by Saudi Arabia (500,000 bpd); Iraq (211,000 bpd); United Arab Emirates (144,000 bpd); Kuwait (128,000 bpd); Kazakhstan (78,000 bpd); Algeria (48,000 bpd); Oman (40,000 bpd); and Gabon (8,000 bpd) starting May until the end of 2023.
Other OPEC+ producers are also being encouraged to join the voluntary cuts, Amena Bakr, Chief Opec Correspondent & Deputy Bureau Chief at Energy Intelligence, reported.
The latest cuts come on top of the 2 million bpd cut announced in October 2022 until the end of this year and in addition to Russia's announcement on Sunday that it would extend its 500,000 bpd cut to the end of 2023.
Russia's Deputy Prime Minister Alexander Novak said that Russia would cut 500,000 bpd through the end of 2023 to ensure predictability in the global oil market in a period of high volatility and unpredictability due to the ongoing banking crisis in the U.S. and Europe, the global economic uncertainty, and "unpredictable and short-sighted energy policy decisions."
OPEC said on Monday that the JMMC meeting "noted that this is a precautionary measure aimed at supporting the stability of the oil market," using the same wording as Saudi Arabia did in its own announcement on Sunday.
The latest cuts signal that OPEC and OPEC+ are now firmly back in control of the global oil market.
By Tsvetana Paraskova for Oilprice.com
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Comments
The cut is indeed a hefty one coming in the aftermath of Russia’s cut of 500,000 barrels a day (b/d) from March to the end of June which has now been extended until the end of 2023 in retaliation against Western countries’ imposing an oil price cap on Russian oil exports.
The OPEC+ cut is intended to ensure stability in the global oil market and also prevent oil prices declining further over fears of a banking crisis. It could also be interpreted as a belated support to Russia over the price cap since the cap could in the future be applied to OPEC+ exports.
Moreover, OPEC+ members with the exception of Russia need a Brent crude price of $80-$100 a barrel to balance their budgets.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert