- Nick Edser
- Economic Affairs Correspondent
Oil prices rose after some of the major exporting countries decided to reduce production suddenly.
The price of Brent crude increased by 7 percent, or more than 5 dollars, to reach 85 dollars a barrel.
This came after Saudi Arabia, Iraq and Gulf states announced a decision to cut production by one million barrels per day.
Oil prices rose with the beginning of the Russian invasion of Ukraine, but returned to what they were before the start of the conflict.
However, the United States has been calling on producers to increase production in order to lower energy prices.
And the rise in energy and oil prices last year contributed to an increase in inflation rates, which caused an increase in pressure on the financial resources of households.
Commenting on the production cut news, the US national security spokesperson said: “We don’t think a cut is advisable at this time given the uncertainty in the markets – and we’ve made that clear.”
The decision to cut production was made by members of the OPEC+ oil producers’ organization. The group contributes nearly 40 percent of the world’s total crude oil production.
Saudi Arabia will reduce its production by 500 thousand barrels per day, and Iraq by about 211 thousand barrels. The UAE, Kuwait, Algeria and Oman will also take measures to reduce production.
An official at the Saudi Energy Ministry described the move as a “precautionary measure aimed at supporting the stability of the oil market,” according to the official Saudi Press Agency.
Analysts expected oil prices to rise as a result of the new measures.
Nathan Pepper, an independent analyst specializing in oil affairs, told the BBC that the move taken by OPEC Plus appears to aim to keep the oil price above $80 a barrel in the medium term, as demand may decline due to the global economic situation.
The latest cuts come after the announcement of a previous cut by OPEC Plus last year by two million barrels per day.
Last year’s decision came despite calls from the United States and other countries for oil producers to pump more crude.
President Joe Biden had commented on the decision of the OPEC Plus group to reduce its production last October, saying that he “felt frustrated with the short-sighted decision.”
The OPEC Plus group includes the Organization of the Petroleum Exporting Countries (OPEC), in addition to other countries, including Russia.
Russia said it would extend the previously announced reduction in oil production – by half a million barrels per day – until the end of the year.
Russia’s invasion of Ukraine in February last year caused a spike in energy prices due to concerns about oil supplies. And the price of Brent crude – an international benchmark – reached its highest level, approaching $ 130 a barrel.
“important step”
Sameer Hashemi: Middle East Economics Editor
The sudden announcement is important for several reasons.
Despite the fluctuations in prices in recent months, there were fears that global demand for oil might exceed supply, especially at the end of the year. Analysts expect higher oil prices, which may increase pressure on inflation rates – exacerbate the cost of living crisis and escalate recession risks.
It is interesting that this announcement came only one day before the meeting of the “OPEC Plus” organization.
And there were indications from the members about their commitment to the same production policy, that is, not to go to a new cut in production, which is why the announcement was a big surprise. It is possible that other countries will announce production cuts, which will put more pressure on supplies.
The latest development is likely to lead to further tension in relations between the United States and Saudi Arabia, which has a leading role in OPEC+.
The White House had called on the group to increase supplies to lower prices, and thus influence Russia’s financial resources.
However, the declaration underscores the close cooperation between the oil-producing countries and Russia.