Saudi Arabia, Six Other OPEC+ Members Announce Surprise New Oil Production Cuts

(CNSNews.com) – Saudi Arabia and half a dozen other members of OPEC+ announced on Sunday that they plan to cut up to a combined 1.15 million barrels of oil a day from May until the end of 2023, calling the decision a “precautionary measure” aimed at ensuring market stability.

The unexpected move comes six months after a decision to cut production by two million barrels a day, also through the end of 2023, sparked a serious diplomatic spat between the Biden administration and the kingdom.

The seven producers each issued separate but evidently orchestrated announcements about their “voluntary” reduction plans. Iraq by 211,000, the United Arab Emirates by 144,000, Kuwait by 128,000, Algeria by 48,000 and Oman by 40,000 barrels a day.

Russia, meanwhile, announced that it would extend its already-implemented reduction of 500,000 barrels a day – which it began at the beginning of March – through the end of the year.

“As responsible and preemptive actions, Russia will extend its voluntary oil production reduction by 500,000 barrels a day until the end of 2023 from the average production level in February established in conformity with independent sources,” Deputy Prime Minister Alexander Novak said in a statement.

Oil prices rose after the news, with the European benchmark Brent crude oil climbing to above $84 a barrel, its highest since the first week of March.

According to the AAA, the average price for regular gas price in the U.S. was around $3.50 on Sunday, up from $3.37 a month ago, and down from $4.20 a year ago.

“We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear,” Reuters quoted a U.S. National Security Council spokesperson as saying in response to Sunday’s announcements.

The announcements by the various oil producers made clear that the new cuts were additional to those announced last October, when OPEC+ agreed on a reduction by two million barrels a day until the end of 2023.

That decision, shortly before the U.S. midterm elections, came despite Washington’s appeals for OPEC+ to increase supply. The administration responded bitterly, portraying the move as one that would hurt U.S. interests and benefit Russia’s war in Ukraine.

President Biden warned of “consequences” and White House and State Department officials said the administration would consult with Congress after the midterms and look to “recalibrate” the 70-plus year relationship with Saudi Arabia.

Reflecting the angry reaction in Congress, Senate Foreign Relations Committee chairman Robert Menendez (D-N.J.) pledged to block arms sales to the kingdom, accusing it of helping to “underwrite Putin’s war through the OPEC+ cartel.”

The Saudi foreign ministry issued a statement denying the production cut had been “politically motived” against the U.S. or related to the war in Ukraine. National Security Council coordinator for strategic communications John Kirby dismissed the Saudi statement as “spin.”

When Kirby four months later was asked what had become of the heralded response to the kingdom, he said there already had been consequences, since “Congress took action to limit arms sales to Saudi Arabia.”

He also suggested that the Saudis had moved in a more positive direction from the U.S.’s point of view, noting that senior officials from the kingdom had visited Kyiv and pledged energy infrastructure support worth $400 million to Ukraine.

And Kirby noted that Saudi Arabia had voted in favor of a U.N. General Assembly resolution adopted on the first anniversary of the invasion, calling for “a comprehensive, just and lasting peace in Ukraine” and for Russia to withdraw its forces immediately and completely.

Asked how his praise for Saudi Arabia fit with the review that the White House said it would undertake after the October OPEC+ decision, Kirby said, “We are focused on making sure that this, like all other bilateral relationships, serves the interests of the American people first and foremost.”

“We’re focused on – on moving this forward,” he said. “And we believe that the [Ukraine assistance] announcement, again, over the weekend by Saudi Arabia is a step in the right direction.”

The latest oil production cut announcements came on the eve of a virtual meeting Monday of the OPEC+ ministerial monitoring committee, which comprises all of the producers that declared planned reductions on Sunday, except for Oman.

OPEC+ is made up of the 13 OPEC producers, led by Saudi Arabia, plus another 10 non-OPEC producers, led by Russia.

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