OPEC+ Will Reduce Oil Production in July 2023
Oil-producing nations collaborate in reducing oil production to attain an equilibrium between supply and demand. This move aims to enhance prices and maintain stability in the oil market. Typically, the OPEC+ coalition wants to plan measures that will establish balance in the worldwide oil market.
Reasons for reduction
The global oil industry is influenced by various factors: supply and demand, economic and social policies in oil-producing and consuming nations, and geopolitical conditions. Consequently, the reduction of oil production is an effective strategy for the alliance to address the challenges faced by the industry.
The oil industry is presently encountering several obstacles due to surplus supply and low demand in some markets, coupled with the impact of the COVID-19 pandemic. As a result of these challenges, oil production has been declining in recent years. The alliance is anticipated to adopt further measures to tackle these issues and maintain stability in the oil market.
Which countries will reduce oil production?
At a meeting of the OPEC+ alliance held in Vienna, several oil-producing countries, such as Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, Oman, and Algeria, agreed to reduce production voluntarily.
Saudi Arabia announced that it will be providing additional temporary cuts to oil production. The Saudi Energy Minister, Prince Abdulaziz bin Salman, confirmed during a press conference that the kingdom will reduce production by one million barrels per day starting July 1st for a month. There is also a possibility of an extension.
It has been announced that Iraq will continue its voluntary production cut of 211,000 barrels per day until the end of the upcoming year.
Additionally, Oman has decided to extend its voluntary production cut of approximately 40,000 barrels per day until the end of 2024.
The United Arab Emirates has agreed to continue its voluntary reduction of daily oil production by approximately 144,000 barrels.
Similarly, Algeria has committed to extending its production cut by approximately 48,000 barrels per day during the same period.
Kuwait has also approved the extension of its voluntary production cut of 124,000 barrels per day until the conclusion of 2024.
Russian Deputy Prime Minister Alexander Novak has stated that the OPEC+ alliance has cut a total of 3.66 million barrels per day. These cuts have been made as a precautionary measure in coordination with the participating countries in the OPEC+ agreement. The voluntary cuts were previously announced in April and will be based on the baseline production level as agreed upon in the 35th OPEC+ ministerial meeting on June 4th, 2023.
Impact on oil prices
The decision by OPEC+ to reduce production has resulted in a significant increase in oil prices. In early Asian trading after the OPEC+ meeting, Brent crude futures saw a rise of 3%, or $2.29 per barrel, reaching $78.42 per barrel, with a session high of $78.73 per barrel. In addition, West Texas Intermediate crude rose by $2.27, or 3.2%, to $74.01 per barrel, having touched a high of $75.06 per barrel earlier in the day.
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