Several of the world’s largest oil exporters have announced surprise production cuts, which are expected to push prices higher.
Saudi Arabia, Iraq and several Gulf countries said they are curbing production to help market stability.
Oil prices skyrocketed when Russia invaded Ukraine, but are now back to pre-conflict levels.
However, the US has urged producers to increase production in a bid to lower energy prices.
Reacting to the news of the recent cuts, a US National Security Council spokesman said: “We do not believe that cuts are prudent at this time given the market uncertainty – and we have made that clear.”
The cuts – which total more than a million barrels a day – will be made by members of Opec+ oil producers. The group accounts for about 40% of the world’s total crude oil production.
Saudi Arabia cuts production by 500,000 bpd and Iraq by 211,000. The United Arab Emirates, Kuwait, Algeria and Oman are also cutting back.
An official with the Saudi Energy Ministry said the move was “a precautionary measure aimed at aiding oil market stability,” the official Saudi press agency said.
The latest cuts come on top of a two million barrels per day (bpd) cut announced by Opec+ in October last year.
However, last year’s cut came despite calls from the US and other countries for oil producers to produce more crude oil.
When the Opec+ group announced its production cuts in October, US President Joe Biden said he was “disappointed by the short-sighted decision”.
Analysis by Sameer Hashmi, Middle East Economic Correspondent
This surprise announcement is significant for several reasons.
Despite price volatility in recent months, there have been concerns that global oil demand could outstrip supply, particularly towards the end of the year. Analysts expect oil prices to spike after today’s announcement, which could potentially put more pressure on inflation – which would worsen the cost-of-living crisis and increase the risk of a recession.
Interestingly, this announcement comes just a day before the Opec+ meeting. There were hints from members that they would stick with the same production policy, meaning there would be no new cuts, so it came as a big surprise. There’s a chance more members of the group could announce voluntary cuts – squeezing supplies even more.
The development is also likely to further strain ties between US-Saudi Arabia-led Opec+. The White House had urged the group to increase supplies to cool prices and check Russia’s finances.
However, today’s announcement also underscores the close cooperation between the oil-producing countries and Russia.
The Opec+ group includes the Organization of Petroleum Exporting Countries (OPEC) as well as other countries including Russia.
Russia has said it will extend its previously announced production cut by half a million barrels a day through the end of the year.
Russia’s invasion of Ukraine in February last year sent energy prices higher on concerns over oil supplies. The price of Brent crude — an international benchmark — peaked at almost $130 a barrel at times.
This surge has pushed up energy and fuel prices around the world, and in turn has helped push up inflation – the rate at which prices are rising – which has put pressure on household finances.
However, the price of Brent has since fallen back to around US$80 per barrel.
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