Eight Countries Such As Saudi Arabia Have Reduced Their Oil Production By Ove...

After OPEC members jointly reduced production in October last year, Saudi Arabia took the lead in reducing production once again. On the evening of April 2, Beijing time, eight oil producing countries, including Saudi Arabia and the United Arab Emirates, suddenly announced that they would implement voluntary production reduction plans, lasting from May this year to the end of 2023, with a total production reduction exceeding 1.64 million barrels per day.
The international crude oil futures market rose in response, with brokers predicting that oil prices will enter an upward path, and even investment banks raising their crude oil price forecast for next year to $100.
The United States, another major oil producer, said the move was unwise, but analysts believe the United States has limited countermeasures
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Production reduction aimed at stabilizing the market
A total of 8 countries have announced a reduction in oil production, including OPEC member countries Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, Algeria, and non OPEC countries Russia, Kazakhstan, and Oman.
Saudi Arabia, the "leading brother" of the Organization of the Petroleum Exporting Countries, has made the largest reduction in production. The country announced that it will voluntarily reduce its daily crude oil production by 500000 barrels from May until the end of 2023. The Saudi National News Agency quoted an official as saying that Saudi Arabia made this decision after coordinating with some oil producing countries, and the voluntary reduction of production will continue until the end of this year. The official also said that the Saudi Arabia made this decision to "support the stability of the international crude oil market.".
The United Arab Emirates and Kuwait have stated to the outside world that they will voluntarily reduce crude oil production from May to the end of 2023, with the UAE reducing production by 144000 barrels per day and Kuwait reducing production by 128000 barrels per day.
Iraq announced a voluntary reduction of crude oil production by 211000 barrels per day from May to the end of 2023.
The Ministry of Energy and Mineral Resources of Algeria announced that Algeria would voluntarily cut its daily crude oil production by 48000 barrels from May to the end of 2023. Algeria stated that the voluntary production reduction action is a preventive measure developed after coordination with some OPEC countries.
The Ministry of Energy of Kazakhstan stated that it had decided to work with OPEC countries to reduce crude oil production by 78000 barrels per day from May to the end of 2023.
Oman announced that it would implement a voluntary reduction in crude oil production from May to the end of 2023, reducing daily crude oil production by 40000 barrels.
In addition, Russian Deputy Prime Minister Novak stated on April 2 that Russia is willing to extend the measure of reducing oil production by 500000 barrels per day to the end of 2023 based on the average production level in February.
Novak emphasized that in view of the current situation of the global oil market, the Russian side has taken the above responsible preventive measures. Due to the ongoing banking crises in the United States and Europe, as well as the uncertainty of the global economy and unpredictable decisions in energy policies, the global oil market is experiencing periods of high volatility and unpredictability.
Previously, Novak had stated that Russia would voluntarily reduce its oil production by 500000 barrels per day from early March to the end of June. Russia has decided not to sell oil to economies that directly or indirectly support the price limit on Russian oil, so it has decided to reduce production.
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The upward inflationary pressure on oil prices continues
International oil prices fell to $70 per barrel last month, the lowest level in 15 months, which is not unrelated to market concerns that the global banking crisis may hit demand. The joint production reduction in Saudi Arabia and other countries has injected a tonic into the oil market.
On April 3, during Asian morning trading, the two major crude oil futures contracts, WTI in New York and Brent in London, surged 7% in the opening, and Brent crude oil jumped to $85 in one fell swoop. On the institutional side, Goldman Sachs, the oil majority, raised its Brent crude oil price forecast for the end of 2023 from $90 to $95, and raised its Brent crude oil price forecast for the end of 2024 from $97 to $100.
Regarding the future trend of international oil prices, Minsheng Securities pointed out that the peak travel season is approaching, and oil prices are expected to restart the upward channel.
The main performance is as follows: in terms of supply, the production of the United States, one of the main producers, has reached a bottleneck; Currently, OPEC is more likely to jointly lower oil prices and ensure high and stable oil prices. Therefore, OPEC will not easily increase crude oil production. Demand: China's economy has shown a recovery trend, and the reduction of reserve requirements is expected to further stimulate the release of demand; The consumption of gasoline in the United States is rising rapidly. With the arrival of the peak travel season, it is expected that the oil price trough will not last too long, and the oil price is expected to restart the upward channel.
Everbright Securities pointed out that insufficient upstream capital expenditure in the medium to long term has resulted in sluggish growth in crude oil supply, and it is expected that oil prices will maintain a medium to high level in the medium to long term.
Zhong Meiyan, director of Everbright Futures Energy and Chemical, analyzed and believed that the news of the large production reduction would emotionally drive relevant varieties upward. The impact of crude oil on energy and chemical varieties will have a differentiated performance. The supply and demand of polyester raw materials themselves are tight and balanced, and the impact of PX on PTA is expected to continue, so the price is expected to continue to be strong.
"Taking measures to reduce production, it is expected that the oil price will run stronger. The rise in crude oil may drive up the cost of energy and chemical products, and the price will follow the stronger operation." Zheng Mengqi, a researcher at Haizheng Futures Energy and Chemical, said.
Institutions also believe that the high price of crude oil will stimulate stubborn inflation, and the anti inflation task faced by central banks, including the Federal Reserve, is more complex.

The United States says this is not advisable
Analysts believe that Saudi Arabia's lead in coordinating production cuts may once again exacerbate tensions between the country and the United States, another major oil producer.
In response to the decision to cut production, a spokesman for the White House National Security Council said: "Given market uncertainty, the current production reduction measures are not wise and advisable. The White House will continue to work with all producers and consumers to ensure that the energy market supports economic growth and lower prices for American consumers.".
Last October, OPEC announced a reduction of 2 million barrels of crude oil production per day. The White House expressed "disappointment" and accused OPEC of making an alliance with Russia. US President Biden has warned that Saudi Arabia's approach "will have consequences", and members of the Democratic Congress of the United States have urged the United States to freeze its cooperative relationship with Saudi Arabia.
At that time, facing the aggressive stance of the United States, the Saudi side also responded. According to a report by the Saudi Arabian newspaper last year, Saudi Foreign Minister Faisal bin Farhan emphasized that "OPEC member countries have taken responsible actions and made appropriate decisions. OPEC countries seek market stability and achieve the interests of producers and consumers." The Saudi Foreign Ministry expressed "complete opposition" to the statement by the United States that Saudi Arabia supports a significant production reduction as a "standing in line" with Russia, He insisted that the decision was "purely economic considerations".
The Financial Times analysis believes that the Saudi Arabia led production reduction is "unusual". Last October, OPEC's largest production reduction has led to a conflict with the United States. This production reduction is more likely to lead to a renewed dispute between Saudi Arabia and the United States.
Today, U.S. President Biden has fewer cards in his hand than last year to counter OPEC and compete for dominance in the global oil market. Since its push to implement the largest strategic petroleum reserve (SPR) release plan in history, the US strategic petroleum reserve inventory has now fallen to its lowest level since 1983.

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