A further reduction in the ability to support oil prices. While economic growth remains sluggish, two OPEC+ heavyweights Saudi Arabia and Russia this Sunday aim to announce the extension of oil production cuts into June. Thus, Riyadh will continue to cut production by 1 million barrels per day (bpd) for the period from April to June, its energy ministry announced, citing the official Saudi Press Agency (SPA). For its part, Moscow will cut capacity by 471,000 barrels per day, affecting both production and exports.
A financial windfall for Moscow
In detail, Russia will implement additional production cuts of 350,000 barrels per day in April, 400,000 in May and 471,000 in June, indicated Alexander Novak, Russia’s deputy prime minister in charge of energy. In terms of exports, the decrease “ 121,000 barrels per day » In April and “71,000 » In May, according to the Russian leader. Although Ukraine accounts for a smaller share of the federal budget than it did before the conflict, financial losses from hydrocarbon sales are essential for Moscow at a time when its economy is focused on the war effort to support its military offensive at home. neighbor. However, sanctions imposed by Western countries have affected revenues, forcing Moscow to redirect its exports to Asia, particularly China and India.
Other OPEC+ countries are also cutting their production
For both Riyadh and Moscow, the measures are in addition to 500,000 barrels per day cuts announced in April 2023 and which will last until the end of 2024. Among the 23 other members of OPEC+, other countries have also announced to extend their cuts. . The United Arab Emirates (UAE) will cut its oil production by 163,000 bpd by June, Kuwait by 135,000, Algeria by 51,000 and Oman by 42,000. Iraqi Oil Minister Hayan Abdel Ghani confirmed to reporters that Baghdad would also extend its production cuts. This integrated strategy was unveiled in spring 2023 for a total of 1.6 million barrels a day, before being reinforced by additional efforts from Moscow and Riyadh.
In anticipation of this new expansion, oil prices surged on Friday, with American West Texas Intermediate (WTI) occasionally rising above $80, the first time since November. A barrel of Brent from the North Sea hit a one-month high and ended up 2% at $83.55. But it remains far from its short-lived surge near $100 in late September, and particularly the $140 it reached after the Russian invasion of Ukraine.
The geopolitical bounty
According to analysts, the cartel has so far produced 6.8 million barrels per day less than in September 2022, the post-pandemic peak. Of this total, about 2.2 million barrels are affected by commitments made up to the end of March, including 1 million for Saudi. Speaking recently on a possible renewal of these cuts, Commerzbank’s Barbara Lambrecht asserted: Crude oil will remain supported around $80 per barrel until the market consolidates the geopolitical premium. » Linked to the situation in the Middle East.
The oil demand forecast for this year is uncertain. OPEC expects another year of relatively strong demand growth of 2.25 million bpd, led by Asia, while the International Energy Agency (IEA) forecasts much slower growth of 1.22 million bpd.
