Stock UAE Oil Refinery Adnoc Ruwais
The Ruwais refinery and petrochemical complex, operated by ADNOC, in Al Ruwais. Image Credit: Bloomberg

OPEC+ announced a surprise oil production cut that will exceed one million barrels a day, curtailing supply from May despite a recovery in prices from 15-month lows.

Oil prices soar after OPEC+ output cut
Oil surged at the week's open after OPEC+ unexpectedly announced crude output cuts that threaten to tighten the market, delivering a fresh inflationary jolt to the world economy and irking the White House.

West Texas Intermediate soared as much as 8%, the biggest intraday move in more than a year, and traded at $79.38 a barrel at 7:27 a.m. in London, while in wider markets the dollar advanced along with Treasury yields.

Saudi, UAE and Kuwait slash oil output

Saudi Arabia led the group by pledging its own 500,000 barrel-a-day supply reduction. Fellow members including Kuwait, the UAE and Algeria followed suit, while Russia said the production cut it was implementing from March to June would continue until the end of the 2023.

That means, starting in May, there will be about 1 million barrels a day less crude flowing into the market than previously expected.

In separate statements, the OPEC+ countries said the cuts are to ensure stability in the energy market.

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Suhail bin Mohammed Al Mazrouei, UAE’s Minister of Energy and Infrastructure, announced that the UAE will voluntarily cut its oil output by 144,000 bpd, effective May through the end of 2023, in coordination with some countries that are parties to the OPEC+ agreement.

“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,” the minister said in a statement.

OPEC+ is scheduled to hold the Meeting of the Joint Ministerial Monitoring Committee (JMMC), on Monday, via videoconferencing.

Saudi Arabia, meanwhile, said it will implement a voluntary cut of 500,000 barrels per day from May till the end of 2023. Kuwait’s energy ministry said the country will cut production by 128,000 barrels a day until the end of the year, while Iraq will cut its oil production by 211,000 barrels per day. Oman said it will cut oil output by 40,000 barrels a day.