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Major oil powers led by Saudi Arabia announced a surprise production cut of more than one million barrels per day on Sunday, calling it a “precautionary” move aimed at stabilising the market.
The reductions, on top of a Russian decision to extend a cut of 500,000 barrels per day, and despite US calls to increase production, risk stoking inflation and pressure to raise interest rates.
Cuts by Saudi Arabia, Iraq, the UAE, Kuwait, Algeria and Oman from May to the end of the year will top one million barrels per day — the biggest reduction since the OPEC+ cartel slashed two million barrels per day in October.
Russia, a leading member of the OPEC+ cartel, said it was also extending an existing cut of 500,000 bpd to the end of this year, describing it as “a responsible and preventive action”.
Oil prices soared almost six percent in Asian trade on Monday morning with West Texas Intermediate jumping by 5.74 percent to $80.01 a barrel and Brent climbing 5.67 percent to $84.42.
A Saudi energy ministry official “emphasised that this is a precautionary measure aimed at supporting the stability of the oil market”, the official Saudi Press Agency said.
The cuts follow a drop in oil prices triggered by jitters over the banking sector, following the collapse of US lender SVB and UBS’s hurried buy-out of troubled rival Credit Suisse, UAE-based oil expert Ibrahim al-Ghitani told AFP.
Brent crude oil prices, trading just below $80 a barrel late last week, should bounce to above $80 as a result of the reductions, he said, calling prices below $80 “unacceptable” for OPEC+.
“The producing countries adhere to a balancing level that supports their large financial budget this year, and their next economic plans,” al-Ghitani said.
‘Recessionary pressures’
The reductions follow a controversial decision in…
Source : france24
