Iraq, KSA, UAE, Kuwait, Russia, Kazakhstan extend oil cuts to boost prices

Moscow, Riyadh, Baghdad, and several other OPEC+ members have announced extensions to oil production cuts initially introduced in 2023. The decision is part of an agreement among major oil producers to bolster prices amidst economic uncertainty. The plan to extend cuts until mid-2024 builds upon previous reductions in both oil output and exports as leading energy producers endeavor to elevate market rates.

Saudi Arabia’s energy ministry declared a reduction of one million barrels per day (bpd) from April to June (Q2), while Russia disclosed 471,000 bpd of cuts for Q2. Russia’s Deputy Prime Minister Alexander Novak stated that these additional cuts would be gradually reinstated post the second quarter, contingent upon market conditions. These measures supplement the 500,000 bpd reduction announced in April 2023, continuing until the end of 2024.

Following suit, UAE, Kuwait, Iraq, and Kazakhstan have committed to extending existing voluntary cuts until the conclusion of June. Since late 2022, the OPEC+ oil alliance, comprising 22 nations, has collectively implemented supply cuts exceeding five million bpd.

Russia’s invasion of Ukraine in 2022 propelled oil prices to $140, augmenting earnings across the industry. In response to Western sanctions targeting Moscow’s energy exports due to the Ukrainian offensive, Russia escalated supplies to countries like China and India. The anticipation of the new extension propelled oil prices on Friday, with the US West Texas Intermediate (WTI) surpassing $80 for the first time since November, and the North Sea Brent Crude Barrel reaching a month-high of $83.55.

The OPEC alliance, initially comprising 13 members led by Riyadh, established OPEC+ in 2016 with an additional 10 countries, including Moscow, to mitigate price volatility amid US competition. However, the lack of unanimity among members has left Saudi Arabia without consensus for almost a year.

Economist Jorge Leon of Rystad Energy emphasized that voluntary cuts signal a lack of cohesion within OPEC+. Leon warned that more countries must contribute to official cuts through a joint agreement to prevent the alliance from further faltering. In December, Angola exited the alliance due to disagreement over production cuts, supported by heavyweight Riyadh.