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A group of OPEC+ member countries on Sunday announced voluntary oil production cuts that will run from May through the end of this year.
The surprise move entails cuts of about 1.15 million barrels per day (BPD) and was led by Saudi Arabia, Iraq, United Arab Emirates and Kuwait. Saudi Arabia’s Ministry of Energy said in a statement the production cut "is a precautionary measure aimed at supporting the stability of the oil market."
The move will likely cause oil prices to rise as output falls, which in turn would have a negative effect on consumers as gasoline prices increase. Average gas prices in the U.S. have ticked up about 13 cents over the last month to $3.50 a gallon according to AAA.
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Several OPEC countries and partner coalition OPEC+ announced oil production cuts of more than 1 million barrels per day that will run from next month through the end of this year. (AP Photo / Lisa Leutner / File / AP Newsroom)
Five members of the Organization of the Petroleum Exporting Countries (OPEC) – Saudi Arabia, Iraq, UAE, Kuwait and Algeria – were joined by two OPEC+ countries that aren’t official oil cartel members but often participate in the group's actions.
The five OPEC members will make the largest cuts to their oil production, with Saudi Arabia cutting 500,000 BPD, Iraq cutting 211,000 BPD, UAE cutting 144,000 BPD, Kuwait cutting 128,000 BPD and Algeria cutting 48,000 BPD.
The two OPEC+ countries participating in the output reduction – Kazakhstan and Oman – will cut 78,000 BPD and 40,000 BPD, respectively.
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A crude oil pump jack is shown in the Permian Basin in Loving County, Texas, Nov. 22, 2019. (Reuters / Angus Mordant)
The latest oil production cuts come in addition to the 2 million BPD output cuts OPEC+ announced in October.
Russia previously announced a unilateral production cut of 500,000 BPD in February through the end of the year after Western countries imposed a price cap of $60 per barrel on Russian oil as part of a sanctions package stemming from the invasion of Ukraine.
The U.S. has lobbied for oil-producing countries to increase supply and support lower energy prices to sustain economic growth while also constraining a vital revenue stream used by Russia to finance its war effort. The Biden administration criticized the latest OPEC+ announcement as a spokesperson for the National Security Council told Reuters, "We don't think cuts are advisable at this moment given market uncertainty – and we've made that clear."
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Oil prices recently fell below $67 per barrel in mid-March, hitting a 15-month low amid the recent banking crisis caused by the failure of two U.S. firms and Credit Suisse’s distress, which led to its acquisition by UBS. Since hitting the low of $66.74 on March 17, oil prices have rebounded and closed at $75.70 on March 31.
OPEC+ is scheduled to hold a virtual meeting on Monday.
Reuters contributed to this report.