Moscow, Riyadh, and several other OPEC+ members have decided to extend oil production cuts initially announced in 2023, aiming to stabilize and boost oil prices amid economic uncertainties.
Details of the Extension
- Duration: The extension will last until mid-2024.
- Additional Cuts: Saudi Arabia plans to reduce production by one million barrels per day (bpd) from April to June (Q2), while Russia will cut 471,000 bpd in Q2.
- Gradual Restoration: Russia’s Deputy Prime Minister Alexander Novak stated that these additional cuts would be gradually restored based on market conditions after the second quarter.
- Previous Cuts: Both countries had already announced a 500,000 bpd reduction in April 2023, effective until the end of 2024.
Involvement of Other Nations
- Extension by Other Members: UAE, Kuwait, Iraq, and Kazakhstan have also committed to extending their voluntary cuts until the end of June.
Impact of OPEC+ Alliance
- Historical Cuts: The OPEC+ alliance, consisting of 22 nations, has implemented cuts exceeding five million bpd since late 2022.
- Effect of Geo-Political Events: Russia’s invasion of Ukraine in 2022 led to a significant increase in oil prices, prompting adjustments in global oil supply.
Market Response and Future Concerns
- Price Surge: Oil prices surged on March 3 in anticipation of the extension, with WTI surpassing $80 for the first time since November and Brent Crude hitting a month-high of $83.55.
- Purpose of OPEC+: OPEC+ was formed in 2016 to stabilize prices and involves a wider group of countries compared to OPEC alone.
- Challenges: The lack of unanimity and voluntary cuts indicate potential challenges to the cohesion of OPEC+ according to experts.
Multiple Choice Questions (MCQs):
- What is the duration of the extension of oil production cuts announced by OPEC+ members?
a) Until the end of 2024
b) Until mid-2024
c) Until the end of 2023
d) Until mid-2023
Answer: b) Until mid-2024 - Which two countries announced significant cuts in oil production for the second quarter of the year? a) UAE and Kuwait
b) Russia and Saudi Arabia
c) Iraq and Kazakhstan
d) UAE and Russia
Answer: b) Russia and Saudi Arabia - What action will be taken regarding the additional cuts after the second quarter, according to Russia’s Deputy Prime Minister Alexander Novak?
a) They will be immediately restored
b) They will be extended until the end of 2024
c) They will be gradually restored depending on market conditions
d) They will be permanently maintained Answer: c) They will be gradually restored depending on market conditions - Which country exited the OPEC+ alliance in December due to a disagreement on production cuts?
a) Kuwait
b) Iraq c) Angola
d) Kazakhstan
Answer: c) Angola - What was the purpose of forming the OPEC+ alliance in 2016?
a) To increase oil production
b) To stabilize oil prices
c) To reduce oil exports
d) To boycott US competition
Answer: b) To stabilize oil prices