Daily Management Review

Saudi Arabia takes on lion's share of new OPEC+ oil cuts


OPEC + countries agreed to reduce oil production by another 500 thousand barrels per day (bpd) from 2020. At the same time, OPEC leader Saudi Arabia announced its readiness to further reduce production by 400 thousand bpd in the first quarter of 2020, as a result of which the reduction will reach 2.1 million bpd.

Vincent Eisfeld
Vincent Eisfeld
Despite the fact that the actions of OPEC + look decisive, analysts are cautious in their forecasts: although the deal will support oil prices, it is unlikely to lead to significant growth.

Saudi Arabia will reduce oil production in the first quarter of 2020 to 9.74 million bpd, said Minister of Energy Abdulaziz bin Salman Al Saud. He confirmed the Kingdom’s voluntary willingness to extract 400 thousand bpd less than the quota under the current OPEC + agreement (10.1 million bpd). However, he noted that the voluntary over-fulfillment of obligations by Saudi Arabia “will continue only if we see that everyone is committed to what they should do.” Note that the discussion of the OPEC + transaction took place in anticipation of Saudi Aramco’s IPO.

On December 5, OPEC + countries agreed to tighten the agreement on limiting oil production, further reducing production by 500 thousand bpd. Thus, the total reduction from the level of October 2018 will increase to 1.7 million bpd, and taking into account the position of Saudi Arabia, it can reach 2.1 million bpd. In total, the quota of OPEC countries will increase by 350 thousand bpd, while other states agreed to reduce production by another 150 thousand bpd as part of the deal.

Immediately after the announcement of the agreements, Brent crude rose 2%, almost reaching $ 65 per barrel.

source: reuters.com