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Opec+ countries to make unexpected production cuts of more than 1 million barrels per day

Oil prices soared after Saudi Arabia and other members of the OPEC+ group announced abrupt cuts in oil production by more than 1 million barrels a day on Sunday, putting Riyadh on a collision course with the United States.

Crude prices rose 8% when trading opened in Asia on Monday morning after news of the cut, with international benchmark Brent trading above $86 a barrel and U.S. benchmark West Texas Intermediate. Ito nearly rose to $81.

Saudi Arabia said on Sunday it would implement a “voluntary cut” of 500,000 b/d, or just under 5% of its output, “in coordination with some other OPEC and non-OPEC countries.” , are looking to raise prices amid fears of declining demand.

Russia, an OPEC+ member, said it would extend the existing cut of 500,000 barrels per day until the end of the year. Moscow’s cuts were first announced in March in retaliation for moves by Western countries to the economy. impose a price cap About offshore oil exports.

The Saudi-led initiative is unusual as it was announced outside of a formal Opec+ meeting, suggesting an element of urgency by members participating in the cuts.

The cuts follow a sharp decline in oil prices following the collapse of US Silicon Valley Bank last month and UBS’s forced takeover of Credit Suisse. Contagion in global financial markets A sharp drop in demand for crude oil.

“OPEC+ made preemptive cuts to pre-empt a possible weakness in demand due to the banking crisis,” said Amrita Sen, director of research at Energy Aspects.

Risk of surprise cuts reignites controversy Between Riyadh and the United States, last year urged the kingdom to pump more oil to curb rampant inflation amid skyrocketing energy costs.

Last October, the White House announced Moscow’s full-scale invasion of Ukraine and the energy crisis by cutting gas supplies to Europe when OPEC+ last announced a formal production cut of 2 million b/d. accusing it of effectively siding with Russia despite Saudi Arabia’s attempts to provoke .

People familiar with Saudi Arabia’s thinking said Riyadh was frustrated last week when the Biden administration publicly ruled out new oil purchases to replenish strategic reserves that were depleted last year as the White House fought to keep inflation under control. It is said that he felt

Energy Secretary Jennifer Granholm statement Oil prices fell temporarily as it could take “many years” to replenish reserves. The White House had previously offered reassurance to Saudi Arabia that it would intervene in buying strategic reserves if prices fell.

A spokesperson for the National Security Council said on Sunday, “Given market uncertainty, we don’t think cutbacks are desirable at this time — and we’ve made it clear.”[But] We will continue to work with all producers to ensure that energy markets support economic growth and lower prices for American consumers. ”

Helima Croft, head of commodities strategy at RBC Capital Markets, said Saudi Arabia is betting on an economic strategy of independence from the United States after relations between Riyadh and Washington deteriorated under the Biden administration.

“This is a Saudi first policy. As we have seen in China, they are making new friends,” Croft said in a recent Beijing mediation. Diplomatic Agreement Between Saudi Arabia and IranThe kingdom was sending a message to the United States that it was no longer a unipolar world.

Voluntary cuts by OPEC+ members will begin in May and continue until the end of 2023, according to a Saudi statement. The statement said Iraq cut crude oil production by 211,000 b/d, the UAE by 144,000 b/d, Kuwait by 128,000 b/d, Kazakhstan by 78,000 b/d, Algeria by 48,000 b/d and Oman by 40,000 b/d. do. from their respective governments.

Brent, the crude oil benchmark, fell to nearly $70 a barrel late last month, but stabilized last week, recovering to just under $80. Brent crude has traded in a relatively tight range between $75 and $90 a barrel over the past six months.

Despite last month’s selloff, many traders predict higher prices Supply is expected to fall short of demand later this year as the Chinese economy fully reopens from Covid-related restrictions.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, the prime minister’s half-brother and Crown Prince Mohammed bin Salman, says the world is underestimating its investment in oil supplies. The kingdom relies on oil revenues to fund Prince Mohammed’s ambitious economic reform programme.

Additional reporting by Felicia Schwartz in Washington

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Oil prices soared after Saudi Arabia and other members of the OPEC+ group announced abrupt cuts in oil production by more than 1 million barrels a day on Sunday, putting Riyadh on a collision course with the United States. Crude prices rose 8% when trading opened in Asia on Monday morning after news of the cut, with international benchmark Brent trading above $86 a barrel and U.S. benchmark West Texas Intermediate. Ito nearly rose to $81.Saudi Arabia said on Sunday it would implement a “voluntary cut” of 500,000 b/d, or just under 5% of its output, “in coordination with some other OPEC and non-OPEC countries.” , are looking to raise prices amid fears of declining demand.Russia, an OPEC+ member, said it would extend the existing cut of 500,000 barrels per day until the end of the year. Moscow’s cuts were first announced in March in retaliation for moves by Western countries to the economy. impose a price cap About offshore oil exports.The Saudi-led initiative is unusual as it was announced outside of a formal Opec+ meeting, suggesting an element of urgency by members participating in the cuts.The cuts follow a sharp decline in oil prices following the collapse of US Silicon Valley Bank last month and UBS’s forced takeover of Credit Suisse. Contagion in global financial markets A sharp drop in demand for crude oil. “OPEC+ made preemptive cuts to pre-empt a possible weakness in demand due to the banking crisis,” said Amrita Sen, director of research at Energy Aspects. Risk of surprise cuts reignites controversy Between Riyadh and the United States, last year urged the kingdom to pump more oil to curb rampant inflation amid skyrocketing energy costs.Last October, the White House announced Moscow’s full-scale invasion of Ukraine and the energy crisis by cutting gas supplies to Europe when OPEC+ last announced a formal production cut of 2 million b/d. accusing it of effectively siding with Russia despite Saudi Arabia’s attempts to provoke . People familiar with Saudi Arabia’s thinking said Riyadh was frustrated last week when the Biden administration publicly ruled out new oil purchases to replenish strategic reserves that were depleted last year as the White House fought to keep inflation under control. It is said that he feltEnergy Secretary Jennifer Granholm statement Oil prices fell temporarily as it could take “many years” to replenish reserves. The White House had previously offered reassurance to Saudi Arabia that it would intervene in buying strategic reserves if prices fell.A spokesperson for the National Security Council said on Sunday, “Given market uncertainty, we don’t think cutbacks are desirable at this time — and we’ve made it clear.”[But] We will continue to work with all producers to ensure that energy markets support economic growth and lower prices for American consumers. ”Helima Croft, head of commodities strategy at RBC Capital Markets, said Saudi Arabia is betting on an economic strategy of independence from the United States after relations between Riyadh and Washington deteriorated under the Biden administration.”This is a Saudi first policy. As we have seen in China, they are making new friends,” Croft said in a recent Beijing mediation. Diplomatic Agreement Between Saudi Arabia and IranThe kingdom was sending a message to the United States that it was no longer a unipolar world. Voluntary cuts by OPEC+ members will begin in May and continue until the end of 2023, according to a Saudi statement. The statement said Iraq cut crude oil production by 211,000 b/d, the UAE by 144,000 b/d, Kuwait by 128,000 b/d, Kazakhstan by 78,000 b/d, Algeria by 48,000 b/d and Oman by 40,000 b/d. do. from their respective governments. Brent, the crude oil benchmark, fell to nearly $70 a barrel late last month, but stabilized last week, recovering to just under $80. Brent crude has traded in a relatively tight range between $75 and $90 a barrel over the past six months.Despite last month’s selloff, many traders predict higher prices Supply is expected to fall short of demand later this year as the Chinese economy fully reopens from Covid-related restrictions.Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, the prime minister’s half-brother and Crown Prince Mohammed bin Salman, says the world is underestimating its investment in oil supplies. The kingdom relies on oil revenues to fund Prince Mohammed’s ambitious economic reform programme.Additional reporting by Felicia Schwartz in Washington
https://www.ft.com/content/3cc7ced1-70db-4854-bd61-d9c92a9c7710 Opec+ countries to make unexpected production cuts of more than 1 million barrels per day

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