OPEC+ unexpectedly makes 1 million barrels cut
It has been announced by a number of OPEC+ countries, such as Russia, that they will be decreasing their oil production until the end of the year due to the unpredictability of the global commodity market. In line with this, Moscow has stated that they will be cutting their production by 500,000 barrels per day, which is a similar move to what Saudi Arabia has done. Analyst Igor Yushkov has predicted that as a result of this decision, the price of oil will stabilize at around $80 per barrel. He has also pointed out that the decision made by OPEC+ is purely based on economic reasons and is intended to prevent a further decline in the value of raw materials. However, some may view this move by the US as political and anti-Washington.
What is happening with oil production
A group of OPEC+ countries, which includes Russia, has recently disclosed their plans to steadily decrease their oil production. This information was shared by a number of nations, such as Saudi Arabia, Kazakhstan, UAE, Oman, Kuwait, Iraq, and Algeria.
As per the statement of Alexander Novak, the Deputy Prime Minister of Russia, the current state of the global oil market is going through a phase of unpredictability, attributed to the banking crisis in the US and Europe, as well as the general global uncertainty.
The Saudi Ministry of Energy has recently revealed their plans to voluntarily decrease oil production by 500,000 barrels per day starting from May until the end of 2023. Additionally, the Kazakh Energy Ministry has also announced a production cut of 78,000 barrels per day from May until the end of 2023, along with other OPEC+ member countries.
Moreover, there will be reductions in production by the UAE (144,000 barrels per day), Oman (40,000 barrels per day), Kuwait (128,000 barrels per day), Algeria (48,000 barrels per day), and Iraq (211,000 barrels per day). It is noteworthy that in February, Russian Deputy Prime Minister Alexander Novak had stated that Russia would reduce oil production by 5% or 500,000 bpd, with this measure being extended until July 2023, and now it will be valid until the year-end.
Further to this, Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud has also announced that there will be production cuts by local companies. According to Bloomberg and Reuters, it is likely that OPEC+ will maintain its policy until the end of the year, and there will not be any increase in oil production.
What does it mean for the market?
As we can see, OPEC countries are attempting to stabilize the oil prices in response to the Federal Reserve raising interest rates. As less cash flow will go into the economy due to the increase in interest rates, the oil prices may decline.
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Recommendation: Long Oil.
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