OPEC+ Announces Crude Oil Production Cut, Prompting Rise in Prices and Displeasure from the US

The recent announcement about the cut in crude oil production came a day ahead of the OPEC+ ministerial panel's virtual meeting, comprising Saudi Arabia and Russia. The panel is anticipated to maintain its previous goal of reducing production by 2 million barrels per day by the end of 2023. In the previous month, the price of crude dropped to $70 per barrel, which was the lowest it had been in the past 15 months. This decline in crude oil prices was attributed to the global banking crisis, which raised concerns about a possible decrease in demand.

Saudi Arabia and other OPEC+ oil producing countries have recently made an unexpected decision to cut oil production by about 1.16 million barrels per day. This move is expected to result in an immediate increase in crude oil prices, with analysts predicting that prices could rise by as much as $10 per barrel. The total reduction in oil production by oil producers around the world has now reached 3.66 million barrels per day, which is equivalent to 3.7 percent of the total global demand for oil.

The decision was made a day before a virtual meeting of the OPEC+ ministerial panel, which includes Saudi Arabia and Russia. The panel is expected to maintain its earlier target of 2 million barrels per day cuts by the end of 2023. Last month, crude oil prices fell to $70 per barrel, the lowest level in the last 15 months, due to concerns about a fall in demand caused by the global banking crisis. OPEC was not expected to announce an oil production cut after crude recovered to $80 a barrel, so Sunday's announcement was a surprise to the market.

According to experts, the new cuts could increase oil prices by $10 a barrel, and there is an expectation of an immediate bounce in oil prices once the trend starts after the weekend. Saudi Arabia, the largest OPEC producer, has pledged to cut output by 500,000 barrels per day. The Saudi Energy Ministry has said that the cuts are a precautionary measure to support the stability of the oil market.

However, the United States has called the decision unfair and unnecessary, arguing that cheap crude oil is necessary to support world economic growth and prevent Russian President Vladimir Putin from raising money for the Ukraine war. Last year, OPEC+ announced a production cut of 2 million barrels per day from November to the end of the year, a move that did not go down well with Washington. Due to the reduction in the supply of oil, prices increased. The Biden administration says that further cuts in oil production are not necessary given the uncertainty of the market at this time.