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Opec extends voluntary cuts to support oil market stability

Haitham Al Ghais, secretary general of Opec. The organisation has extended its voluntary output cuts, led by Russia and Saudi Arabia Reuters
Haitham Al Ghais, secretary general of Opec, which has extended its voluntary output cuts, led by Russia and Saudi Arabia
  • Cuts extended for three months
  • Saudi Arabia cutting 1m bpd
  • Opec watching market conditions

Opec+ producers led by Saudi Arabia and Russia have stretched their additional voluntary crude supply cuts for another three months, as the oil bloc strives to support the stability and balance of sluggish markets.

Oil prices traded flat Monday morning after a slight spike following the Opec announcement. Brent crude traded around $83.50 per barrel. However, the global benchmark has gained nearly 4 percent in a week in anticipation of Opec’s decision and amid increasing geopolitical concerns over the Gaza conflict.

The US benchmark West Texas Intermediate traded at $79.80 per barrel, but it gained nearly 5 percent during the last week.

Saudi Arabia accounts for half of the extended 2.2 million barrels per day (bpd) curbs. The kingdom will extend its voluntary cuts of 1 million bpd until the end of June, keeping its production at around 9 million bpd.

The UAE announced it will extend its supply cut of 163,000 bpd. Its production will remain at 2.9 million bpd.

Russia has obtained an exception to mix its cuts between crude production and exports. Its reduction will amount to a combined 471,000 bpd.

Iraq, Opec’s second-largest crude oil producer after Saudi Arabia, will cut 220,000 bpd, and Kuwait will curb its supply by 135,000 bpd. 

Kazakhstan has committed to cut 82,000 bpd, Algeria will cut its production by 51,000 bpd, and Oman agreed to cut 42,000 bpd, the Opec secretariat said on Sunday.

“These voluntary cuts will be returned gradually subject to market conditions,” Opec said.

Opec cuts were due to expire at the end of March, but analysts were expecting the organisation to carry on the curbs, as countries try to defend the floor price of $80 per barrel.

Nations such as Saudi Arabia need higher oil prices to balance their budgets. Obswervers say the kingdom needs an average crude price of around $90 a barrel.

Oil demand is expected to grow at about 1.5 million barrels a day, according to Goldman Sachs, and non-Opec oil supply remains robust.

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