Key Insights
- OPEC+ agreed to extend oil production cuts of 2.2 million bpd into Q2 2023
- Move aims to defend $80 per barrel price floor, signaling demand concerns
- Saudi Arabia and Russia lead extension of voluntary supply curbs
LONDON (MarketsXplora) – OPEC+ agreed on Sunday to extend voluntary oil output cuts of around 2.2 million barrels per day (bpd) until the end of June, signaling the producer group’s robust determination to defend a price floor of $80 a barrel.
Brent crude edged 0.05% lower to $83.52 per barrel on Monday while U.S. West Texas Intermediate futures slipped 0.19% to $79.82 after the decision by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+.
Top OPEC+ producer Saudi Arabia will prolong its voluntary cut of 1 million bpd until end-June, the state Saudi Press Agency said. This will keep the kingdom’s crude production at around 9 million bpd.
Russia, the group’s other heavyweight, will slash its production and export supplies by a combined 471,000 bpd until end-June. Moscow previously volunteered to cut 500,000 bpd in the first quarter.
Iraq and the United Arab Emirates will also extend their voluntary cuts of 220,000 bpd and 163,000 bpd respectively until the end of Q2, the group said.
“This new move by OPEC+ clearly shows strong unity within the group,” said Jorge Leon, senior vice president at Rystad Energy.
He added the extension signals the group’s “robust determination” to defend an $80 price floor in Q2. Rapidly unwinding the cuts could see prices drop to $77 in May, Leon said.
“Such a move might also be seen as a sign that demand prospects in Q2 are less optimistic than the group thought in November,” he said.
Oil has traded between $75-$85 since January despite OPEC+ supply cuts, Red Sea tensions and risks from Israeli-Palestinian conflict.
OPEC+ had implemented voluntary output reductions of 2 million bpd in the fourth quarter of 2022 amid recession fears and then raised them to 2.2 million bpd in January.