In a surprise move on Sunday, several major oil-producing nations, led by Saudi Arabia, announced a cut in oil production totaling 1.15 million barrels per day from May until the end of the year. This unexpected decision is expected to increase oil prices globally.
However, this announcement could have far-reaching consequences. Firstly, it could financially benefit Russian President Vladimir Putin, who is currently engaged in a conflict with Ukraine, as higher oil prices could help fund his endeavors. Secondly, it could lead to global inflation, resulting in consumers in the United States and elsewhere paying more for fuel. Lastly, this decision could further strain the already troubled relationship between Saudi Arabia and its allies and the United States, as the US has been urging them to increase production to reduce prices and harm Russia’s economy.
The Saudi Arabian Energy Ministry revealed that it will cut its own production by 500,000 barrels per day, in coordination with several OPEC and non-OPEC members (not specified). The reductions announced are in addition to those declared last October, which drew the ire of the Biden administration. The ministry stated that this decision is a “precautionary measure” aimed at stabilizing the oil market, but the reductions represent less than 5% of Saudi Arabia’s 11.5 million barrels per day average production in 2022.
Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman are among the other nations that have agreed to reduce their production. Russia’s Deputy Prime Minister, Alexander Novak, announced that the country will continue its voluntary cut of 500,000 barrels per day until the end of the year, following the imposition of price caps by Western nations in February.
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