NewsOPEC+ extends oil production cuts through June to boost prices

OPEC+ extends oil production cuts through June to boost prices

OPEC+ extends oil production cuts through June to boost prices
Images source: © GETTY | Bloomberg
1:36 PM EST, March 3, 2024

According to Bloomberg, and citing sources from within, the OPEC+ decision to reduce oil production by approximately 2 million barrels per day, initially set to expire in March, has been extended until June. Member country delegates of the oil cartel referenced this decision.

The reduction in supply is not uniformly applied across the organization. Saudi Arabia has committed to reducing about 1 million barrels, while Russia will cut 500,000. The remaining reduction is distributed among other countries, including Iran, the United Arab Emirates, Brazil, Kazakhstan, and Mexico.

The American agency notes that the cartel initially made this extended decision in January. However, compliance has been uneven. For instance, Kazakhstan and Iraq have been exporting several hundred thousand barrels daily, less than their agreed quotas.

Riyadh and Moscow seek higher oil revenues

By cutting production, OPEC+ aspires to raise oil prices. Indeed, prices have begun to rise amid trade crises through the Red Sea and the Suez Canal. Yet, the increases haven't reached what some exporters hoped for. Among the factors limiting greater price hikes are economic challenges in China, the world's largest oil importer.

"According to Fitch Ratings, Riyadh requires prices to be above 90 dollars per barrel to fund its economic transformation projects, which include building futuristic cities and hosting sports tournaments. Russia, its major partner in the alliance, is also in search of funds to sustain its military efforts in Ukraine," Bloomberg reports.

Current oil prices are about 10 dollars per barrel less than what Saudi Arabia prefers. In mid-February, the International Energy Agency noted that global oil supplies had fallen by 1.4 million barrels per day to an average of 101.45 million in January.

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