Saudi Arabia, the unofficial leader of OPEC Plus, said Monday that it would cut production by one million barrels a day. It is more than promised by the group to help balance supply and demand. In March, the country launched an oil war that plunged oil prices to deficient levels. The United Arab Emirates and Kuwait have taken a similar stance, saying they would reduce a total of 180,000 barrels a day.
Other countries haven’t committed to cutting production yet
However, some countries have not proven their commitment to the agreement yet. Iraq, for example, is struggling to cut production by one million barrels a day. Moreover, talks between the government and oil companies in the country have yet to yield tangible results.
Besides, Nigeria, the largest African producer in the group, has not fully complied with its quota. Angola is in a similar situation. But the group’s largest non-OPEC producer, Russia, produced about 1 million barrels more than its daily quota of 8.5 million barrels a day earlier this month.
The decline in Saudi Arabia’s new production is symbolic. Many experts have long insisted that the country will face many income problems if it produces less than 8 million barrels a day. If Saudi Arabia is committed, it will reduce its production to less than 7.5 million barrels per day next month. Reaching the lowest level in 18 years.
Report on Saudi Arabia’s production cuts affected the price of oil temporarily. Taking it from a downward trend to an upward trend, but eventually closed at a lower price.
Reasons for deepening Saudi production
Saudi Arabia announced the kingdom wants to decrease oil production to 8.5 million barrels a day at the level of 2002 as it wants to cut budgets.
According to Javier Bellas, a journalist from Bloomberg, Saudi Arabia has been forced to deal with the financial crisis caused by the global recession and the fall in oil prices. The country relies heavily on its budget for oil trade. Thus, it is trying to decrease production. In addition to its commitment to boost black gold prices and encourage other producers to adhere to their quotas.
Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud said that the voluntary reduction of production outside the agreement would accelerate the process of returning the balance to the market.
Days before the Saudi oil decision, King Salman of Saudi and US President Donald Trump discussed the state of the oil market. They stressed the importance of stability in the global energy market.
Analysts say that crossing the 8 million barrel per day is symbolic for Saudi Arabia. They think that producing less than that will have a devastating effect on its oil revenues.
However, Saudi Arabia does not appear to have many options. In this regard, the kingdom’s strategic allies, the United Arab Emirates and Kuwait have announced that they will reduce their production by 100,000 and 80,000 barrels per day. This is in addition to the OPEC Plus agreement.
- Trading Instrument