UAE, other oil producers announce surprise output cuts

In October 2022, Opec+ had agreed to cut output by two million bpd from November until the end of the year

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Photo: Reuters file
by

Waheed Abbas

Published: Sun 2 Apr 2023, 8:55 PM

The UAE and other Opec+ producers on Sunday announced oil production cuts of 1.64 million barrels per day (bpd) ahead of their meeting on Monday.

In addition to the UAE, Saudi Arabia, Russia, Oman, Iraq, Kuwait, Algeria and Kazakhstan also announced the surprise production cut.

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The oil-producing nations said the decision to reduce output from May until the end of the year has been taken with the aim to bring stability to energy markets. Crude prices, which were trading closer to $90 a barrel earlier this year have dropped below $80 a barrel after the collapse of the US banks last month.

The production cut came as a surprise to the market as some analysts were expecting energy producers will wait for financial markets to calm down after the collapse of the banks before announcing a production cut.

In October 2022, Opec+ had agreed to cut output by two million bpd from November until the end of the year.

Suhail bin Mohammed Al Mazrouei, UAE’s Minister of Energy and Infrastructure, announced a voluntary oil output cut of 144,000 bpd till the end of 2023.

“This voluntary initiative is a precautionary measure taken to ensure market balance and comes in alignment with the production cut agreed upon during the 33rd Opec and non-Opec Ministerial Meeting (ONOMM), held on October 5, 2022," Al Mazrouei said.

Among the other oil-producing nations, Saudi Arabia’s Ministry of Energy announced a voluntary cut of 500,000 barrels per day from May till the end of 2023.

The Kingdom said this is “a precautionary measure aimed at supporting the stability of the oil market.”

Emirates NBD Research said in a note earlier that for most of the year, oil prices have been oscillating between support from China reopening trade and pressure from hawkish central banks and tighter monetary policy.

Oil prices are expected to open higher on Monday on the back of the Opec+ decision as well as US energy showing deterioration in activity in the first quarter of 2023. The Dallas Fed Survey of energy firms showed US firms holding on increasing output and spending during the January-March period.

The Opec+ group is scheduled to hold a meeting via video conferencing on Monday.

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Waheed Abbas

Published: Sun 2 Apr 2023, 8:55 PM

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