Saudi Arabia, Russia and several OPEC+ producers extend voluntary crude supply cuts until end of June

Heavyweights Saudi Arabia and Russia, alongside several other key OPEC+ producers, will extend their voluntary crude supply cuts until the end of the second quarter.

OPEC+ refers to the coalition of the Organization for the Petroleum Exporting Countries and its allies, steered by Riyadh and Moscow.

Saudi Arabia will stretch out its voluntary crude production cut of 1 million barrels per day until the end of the second quarter, the state-owned Saudi Press Agency said Sunday, citing an official source from the country’s Ministry of Energy.

Riyadh’s crude production will be approximately 9 million barrels per day until the end of June, the announcement said.

Russia will trim its production and export supplies by a combined 471,000 barrels per day until the end of June, Russian Deputy Prime Minister Alexander Novak said, according to a Google-translated report carried by Russian state-owned agency Tass. Moscow had volunteered to reduce its supplies by a slightly higher 500,000 barrels per day in the first quarter.

OPEC key producers Iraq and UAE will also prolong their voluntary production cuts of 220,000 barrels per day and 163,000 barrels per day, respectively, until the end of the second quarter, according to Google-translated updates from their state-owned news agencies INA and WAM.

Back in November, OPEC+ countries had held a formal policy of collectively reducing their output by 2 million barrels per day until the end of 2024. Separate from the group’s official strategy, several OPEC+ producers, including heavyweights Saudi Arabia and Russia, announced they would voluntarily trim their supplies by a total of 2.2 million barrels per day until the end of this year’s first quarter. 

The latest production cut announcement comes against a background of a languishing oil price that has largely spasmed in a narrow $75 to $85 per barrel interval since the start of the year, despite OPEC+ supply cuts, persistent Houthi maritime attacks in the crucial Red Sea route and ongoing spill-over risk from Israel’s war against the Iran-backed Palestinian militant group Hamas in the Gaza Strip. Offsetting some of this price support in the short term is lower demand amid imminent seasonal refinery maintenance in the world’s top crude importer, China, which typically exacerbates in the second quarter.

Unlike formal policy changes, voluntary cuts do not require the group’s unanimous consent during an official meeting and bypass the need to distribute production cuts or increases among OPEC+ members. Typically, extracurricular output adjustments are not disputed by OPEC+ countries, as long as they align with the spirit of existing policy — currently, the supplementary cuts build on existing OPEC+ trims.

The group’s next policy negotiations take place in June, by which point independent, third-party data providers will have finalized their assessments of group members’ production capacity baselines — the levels to which each country’s quota is assigned. Heavily coveted, a higher baseline leads to a higher output limit, allowing producers to cash in on firmer revenues in a lofty price environment.

In a shock move, OPEC kingpin Saudi-controlled oil giant Aramco in late January announced it was suspending its long-standing plans to increase its crude production capacity from 12 million barrels per day to 13 million barrels per day by 2027, with Saudi Energy Minister Prince Abdulaziz bin Salman later pinning the decision on the green transition.