As expected, Saudi Arabia will try to maintain upward pressure on oil prices by extending its production cap until the end of June. The Saudi government’s news agency announced on Sunday that the country will extend its voluntary crude production cut of 1 million barrels a day until the end of the second quarter. Saudi Arabia's Ministry of Energy stated that the country’s crude production will be approximately 9 million barrels per day until the end of June.
Russia will also cut its output in tandem with the Saudi decision by a combined 471,000 barrels per day until the end of June, as announced by Russian Deputy Prime Minister Alexander Novak on Sunday. This cut is 29,000 barrels less than the purported half a million barrels a day cut Russia claimed to have made for the current March quarter.
While these production caps are significant, they may not have the same impact on prices as the conflicts in Gaza and the Houthi attacks on shipping in the Red Sea. These situations have contributed to the increase in world oil prices, up between 8% (Brent) and 11% (West Texas Intermediate) so far this year.
Additionally, OPEC producers Iraq and UAE have announced that they will extend their voluntary production cuts of 220,000 barrels a day and 163,000 barrels a day, respectively, until the end of the second quarter. OPEC's next policy negotiations are scheduled for June, where production baselines for the next year will be discussed. This discussion helps set the output quota each country will be allocated, and a higher baseline means higher production. OPEC uses independent global energy consultants to compile these baselines.
The issue of baselines is why Angola pulled out of OPEC late in 2023, and it remains a point of contention for Nigeria. Meanwhile, US production is running at around 13.1 million barrels a day, making it the largest producer in the world.
