Saudi Arabia on Tuesday unilaterally reduced its oil production by 1 million barrels per day (bpd) in a bid to resolve the ongoing stalemate between OPEC+ members over the production rate cuts in February.
The Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, held the 13th Ministerial Meeting via videoconference met to balance the oil markets struggling with a supply glut and weak demand.
Initially met on Monday, the group had postponed the meeting one day due to friction between OPEC+ members over output rate cuts as some oil producing countries like Russia and Kazakhstan are in favor of higher output levels.
In a statement, the group announced that Russia and Kazakhstan will collectively increase their output by 75,000 bpd while the rest of the group will hold output steady.
Thus, the OPEC+ production cut, which was 7.2 million bpd in January, would be 7.125 in February and 7.05 in March.
However, in a press conference after the meeting, Saudi Energy Minister Abdulaziz bin Salman surprisingly pledged an additional cut by 1 million bpd in February and March.
Describing his country’s surprise cut as a 'gesture of goodwill', Salman said the move aims at supporting 'our economy, the economies of our colleagues, OPEC+ countries for the betterment of industry at all levels including the service sectors.'
So, after Saudi Arabia's voluntary reduction, the group's production cut will be 8.125 million bpd in February and 8.05 in March, which also means that the group will reduce its output in February by 925,000 bpd and 850,000 bpd in March from the output rates of January.
- OPEC agreement
As a solution for the lackluster oil demand caused by the global pandemic, the OPEC+ group agreed in April to collectively lower the group's total oil production by 9.7 million bpd from May 1 to June 30.
While the 9.7-million bpd production cut was supposed to be effective only until June 30, it was extended for a month until July 31 due to the worsening pandemic situation.
Therefore, in line with the April agreement, the OPEC+ group lowered its crude oil production cuts to 7.7 million bpd from Aug. 1 to Dec. 31, with a one-month delay.
In a meeting in December, the group agreed to add 500,000 bpd in January and, through monthly meetings, decide on the next month's production quota that will not be more than 500,000 bpd.
By Sibel Morrow