Further reduction in capacity to support oil prices. While economic growth is sluggish, this is the objective of Saudi Arabia and Russia, the two OPEC+ heavyweights of oil exporting countries, by announcing this Sunday the extension until June of their decline in oil production. Thus, Riyadh will continue to reduce its production by one million barrels per day (bpd) for the period from April to June, announced its Ministry of Energy, cited by the official Saudi Press Agency (SPA). . For its part, Moscow will reduce capacity by 471,000 barrels per day, affecting both production and exports.
Financial windfall for Moscow
In detail, Russia will implement an additional reduction in its production of 350,000 barrels per day in April, 400,000 in May and 471,000 in June, indicated the Russian Deputy Prime Minister in charge of Energy, Alexandre Novak. Regarding exports, the reduction will relate to “ 121,000 barrels per day » in April and “71,000 » in May, according to the Russian leader. Despite a smaller share in the federal budget than before the conflict in Ukraine, the financial windfall from the sale of hydrocarbons remains essential for Moscow at a time when its economy is focused on the war effort to support its military assault at home. neighbor. However, revenues are impacted by the sanctions put in place by Western countries, which force Moscow to redirect its exports towards Asia, and in particular towards China and India.
Other OPEC+ countries are also reducing their production
Both for Riyadh and for Moscow, these measures are in addition to the reduction of 500,000 barrels per day announced in April 2023 and which runs 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 reduce its oil production by 163,000 bpd until June, Kuwait by 135,000, Algeria by 51,000 and Oman by 42,000. Iraqi Oil Minister Hayan Abdel Ghani confirmed to journalists that Baghdad would also extend its production cut. This coordinated strategy was unveiled in spring 2023 for a total of 1.6 million barrels daily, before being reinforced by the additional effort of Moscow and Riyadh.
In anticipation of this new extension, oil prices jumped on Friday, with the American West Texas Intermediate (WTI) occasionally rising above $80, a first since November. The barrel of Brent from the North Sea reached a peak in one month and ended with a gain of 2%, to 83.55 dollars. But it remains far from its short-lived surge to nearly 100 dollars at the end of September and especially from the 140 dollars reached following the Russian invasion of Ukraine.
Geopolitical bounty
According to analysts, the cartel has so far produced 6.8 million barrels per day less than in September 2022, which was a post-pandemic peak. Of this total, some 2.2 million barrels are affected by commitments made until the end of March, including one million for the Saudis. Speaking recently on the likely renewal of these cuts, Barbara Lambrecht of Commerzbank assured: that crude oil will remain supported around $80 per barrel, as long as the market integrates a geopolitical premium » linked to the situation in the Middle East.
The oil demand outlook is uncertain for this year. OPEC expects another year of relatively strong demand growth of 2.25 million bpd, driven by Asia, while the International Energy Agency (IEA) forecasts much slower growth of 1.22 million bpd.