Oil-producing countries surprisingly announce production cuts

Saudi Arabia and several other major oil producers surprisingly announced on Sunday that they would cut their oil production by a total of 1.15 million barrels a day. The move is expected to apply from May through the end of the year and could push oil prices higher around the world. Higher oil prices would help Russian President Vladimir Putin finance the war against Ukraine.

Relations between Washington and Saudi Arabia and other oil-producing countries are likely to be further strained. US President Joe Biden's administration has called on Riyadh and other allies to increase production to combat inflation, partly fueled by the war in Ukraine, and to put financial pressure on Russia.

Saudi Arabia's Energy Ministry said on Sunday the cut will be done in coordination with some members of the Organization of Petroleum Exporting Countries, as well as non-OPEC members. Names were not mentioned. It comes in addition to a reduction in production announced in October. The move is a precautionary measure aimed at stabilizing the oil market.

Saudi Arabia's cuts account for less than five percent of the country's average daily production of 11.5 million barrels in 2022. The previous cuts amounted to around two million barrels a day.

Iraq announced a reduction of 211,000 barrels per day, the United Arab Emirates 144,000 barrels, Kuwait 128,000, Kazakhstan 78,000, Algeria 48,000 and Oman 40,000. The announcements were circulated by state media.

Russian news agency Tass quoted Russian Deputy Prime Minister Alexander Novak as saying Moscow would extend a voluntary 500,000 barrel cut until the end of the year. Russia announced the unilateral reduction in February after Western countries imposed price caps on Russian oil purchases.

Saudi Arabia angered the US government last year when the kingdom and other OPEC members agreed to cut production just before the US midterm elections. Inflation, partly triggered by the Russian war of aggression in Ukraine, was a major issue during the elections.

US President Biden announced the consequences at the time and Democratic members of Congress called for a freeze on cooperation with the Kingdom. Both the US and Saudi Arabia denied political motives, saying they are focused on maintaining a healthy market price.

Since the cuts at that time, the price of oil has fallen. Brent crude was around $80 at the end of this week, down from $95 in early October.