Oil Prices Shoot amid Steady Oil Production by OPEC+ and Saudi Cutting Down on Production

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by Bhushan Akolkar · 3 min read
Oil Prices Shoot amid Steady Oil Production by OPEC+ and Saudi Cutting Down on Production
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While the OPEC countries are keen on keeping the production output for oil low, Russia, Iran, and UAE have hinted at boosting production during the same time. Saudi is keenly watching all the developments with detailed attention.

Global oil prices shot up on Thursday, March 4, after the OPEC+ countries said that they would keep the oil production steady throughout April. On the other hand, Saudi is firm on extending its voluntary oil production cut to one million barrels per day up to April end.

While OPCE+ countries agree to have steady production, Russia and Kazakhstan will increase production by 130,000 and 20,000 barrels per day, respectively. On Thursday, Brent Crude Futures jumped 4.15% or $2.68 trading at $66.73 per barrel. Similarly, the US West Texas Intermediate (WTI) crude futures jumped 4% trading at $73.78 per barrel.

The latest decision by OPEC+ has surprised analysts who expected the reversal of output cuts. Energy analysts expected OPEC+ to boost production output to 1.3 million barrels per day for April and beyond. Speaking to CNBC’s “Squawk Box Europe”, Amrita Sen, chief oil analyst at Energy Aspects said that OPEC will have a tough time maintaining the spare oil capacity.

“I understand that it is not just April that they are talking about. (Saudi Arabia is) essentially saying to everybody: ‘Look, it is April and May.’ Just like they did in January when they discussed Feb. and March output,” Sen said.

Saudi Arabia, the biggest producer in the oil market is keeping a hawk’s eye on the recent developments. The OPEC leader has asked its allies to remain “extremely cautious” on the production policy. With the oil market plunging last year with global lockdown due to the Coronavirus pandemic, Suadi eyes for a full-blown recovery ahead. Interestingly, Saudi will meet Russia down the road.

Saudi Arabia vs Russia on Oil Production Outputs

Although Russia is no match to Saudi’s production capacity, it is still a significant player in the oil market. The non-OPEC leader has already hinted at its decision to ramp-up the supply. Russia thinks that the market has already balanced from its 2020 woes and it’s time to look ahead.

Along with Russia, other oil producers like Iran and UAE are willing to boost production and pump more oil into the market. But analyst Sen adds that Riyadh is all focused to bring down global oil inventory to the industry’s five-year average. This will require OPEC to hold down its production up to the month of May.

Since the beginning of February up to March, Saudi Arabia has decided voluntary cuts of 1 million barrels per day. The entire OPEC group has a production cut of 7.2 million barrels per day. Analysts at the Eurasia group also stated:

“Characteristic of the typical divisions within OPEC+, the meetings will be home to passionate debate reflecting quintessentially different views and interests. Saudi Arabia remains the core force behind the market management strategy and is by far the most cautious out of all member states”.

Other market news can be found here.

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