Saudi Arabia will extend its voluntary cut in crude oil production by one million barrels per day until the end of the second quarter, the state-run Saudi Press Agency said on Sunday, citing an official source at the country's energy ministry.
Riyadh's crude oil production will be about 9 million barrels per day by the end of June, the announcement said.
Russia will reduce its production and export shipments by a total of 471,000 barrels per day by the end of June, Russian Deputy Prime Minister Alexander Novak said, according to a Google-translated report from Russian state agency Tass. Moscow had agreed to reduce its deliveries by just over 500,000 barrels per day in the first quarter.
OPEC's main producers Iraq and the United Arab Emirates will also extend their voluntary production cuts of 220,000 barrels per day and 163,000 barrels per day, respectively, until the end of the second quarter, according to Google-translated updates from their state news agencies INA and WAM.
Back in November, the OPEC+ countries had already adopted a formal policy of collectively reducing their production by 2 million barrels per day by the end of 2024. Separate from the group's official strategy, several OPEC+ producers, including heavyweights Saudi Arabia and Russia, announced they would voluntarily reduce their supplies by a total of 2.2 million barrels per day by the end of the first quarter of this year .
The latest production cut announcement comes against the backdrop of weakening oil prices, which have largely fallen in a narrow range of $75 to $85 per barrel since the start of the year, despite OPEC+ supply cuts, continued Houthi naval attacks on the key Red Sea route, etc continued risk of spillover from Israel's war against the Iranian-backed Palestinian militant group Hamas in the Gaza Strip. In the near term, some of this price support will be offset by lower demand due to upcoming seasonal refinery maintenance in the world's largest crude oil importer, China, which typically worsens in the second quarter.
Unlike formal policy changes, voluntary cuts do not require the group's unanimous approval during an official meeting and bypass the need to distribute production cuts or increases among OPEC+ members. As a rule, extracurricular production adjustments are not contested by OPEC+ countries as long as they are consistent with the spirit of existing policies – currently the additional cuts are based on existing OPEC+ cuts.
The group's next political negotiations will take place in June. At this point, independent third-party data providers will have completed their assessments of group members' production capacity baselines – the levels to which each country's quota is assigned. A higher output value is highly desirable and results in a higher production frontier, allowing producers to benefit from higher revenues in a high price environment.
In a shock move, Saudi-controlled OPEC chief Aramco announced in late January that it would suspend its long-standing plans to increase its crude oil production capacity from 12 million barrels per day to 13 million barrels per day by 2027, the Saudi energy minister told Prince Abdulaziz bin Salman later justified the decision with the green transition.