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Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman Al-Saud gestures upon his arrival at the OPEC International Seminar in Vienna in this file photo. -AFP
Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman Al-Saud gestures upon his arrival at the OPEC International Seminar in Vienna in this file photo. -AFP
OPEC+ members extend cuts to oil production

VIENNA: Several OPEC+ countries announced Sunday the extension of additional voluntary cuts of 2.2 million barrels per day for the second quarter of 2024. A statement by the OPEC secretariat said “the announcements of several OPEC+ countries extending additional voluntary cuts of 2.2 million barrels per day, aimed at supporting the stability and balance of oil markets.” The statement added, these voluntary cuts are calculated from the 2024 required production level as per the 35th OPEC ministerial meeting held on June 4, 2023, and are in addition to the voluntary cuts previously announced in April 2023 and later extended until the end of 2024.

“These additional voluntary cuts are announced by the following OPEC+ countries: Saudi Arabia (1,000,000 barrels per day), Iraq (220,000 barrels per day), United Arab Emirates (163,000 barrels per day), Kuwait (135,000 barrels per day), Kazakhstan (82,000 barrels per day), Algeria (51,000 barrels per day), and Oman (42,000 barrels per day) for the second quarter of 2024.

Afterwards, in order to support market stability, these voluntary cuts will be returned gradually subject to market conditions. The above will be in addition to the announced voluntary cut by the Russian Federation of 471,000 barrels per day for the same period (second quarter of 2024), which will be from crude oil production and exports as follows: In April 350,000 barrels per day from production and 121,000 barrels per day from exports.

In May 400,000 barrels per day from production and 71,000 barrels per day from exports. In June 471,000 barrels per day totally from production. Russia’s voluntary production cut is in addition to the voluntary cut of 500,000 barrels per day previously announced in April 2023, which extends until the end of December 2024. The export cut will be made from the average export levels of the months of May and June of 2023.

A Saudi Arabian energy ministry source announced, Riyadh “will extend its voluntary cut of one million barrels per day, which was implemented in July 2023, until the end of the second quarter of 2024,” the official Saudi Press Agency (SPA) reported. “Afterwards, in order to support market stability, these additional cut volumes will be returned gradually subject to market conditions.”

In October 2022, OPEC+ agreed to reduce output by two million barrels per day, a move that fuelled tensions with US President Joe Biden’s administration, which said it amounted to siding with Russia in the war in Ukraine. Sunday’s announcement means Saudi Arabia’s production will stay at roughly nine million bpd, well below its capacity of 12 million bpd.

Energy giant Aramco, the jewel of the Saudi economy, has pledged to achieve “operational net-zero” carbon emissions by 2050, which does not include the emissions from customers burning its products. In January, Aramco made the surprising announcement that the energy ministry had ordered it to maintain production capacity at 12 million barrels per day, abandoning a target of 13 million bpd by 2027.

Officials did not explain the decision at the time, but Energy Minister Prince Abdulaziz bin Salman later told an energy conference that it was spurred by the fact that “we’re transitioning”.

That means Aramco would increasingly pursue investments in other energy forms such as gas and renewables, he said. Aramco reported record profits in 2022 after Russia’s invasion of Ukraine sent oil prices soaring, allowing Saudi Arabia to record its first budget surplus in nearly a decade.

Lower prices resulted in year-on-year profit drops of 23 percent in the third quarter, 38 percent in the second quarter and 19.25 percent in the first quarter of last year, with fourth quarter earnings yet to be announced. Last week, Riyadh-based firm Jadwa Investment said Saudi authorities were “likely to keep oil production in check in the face of a weak demand outlook”, predicting that last year’s cuts would roll over to the end of the third quarter.

This approach would ensure Brent Crude sells for $81 per barrel in 2024, Jadwa said. Analysts often say Riyadh needs oil prices to clear the $80 threshold to balance its budget, though the recent various production cuts may have pushed that figure higher. Riyadh is currently predicting budget deficits through 2026 as it ramps up spending on reform initiatives. — Agencies

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