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Unexpected move comes ahead of Monday ministerial meeting
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Total OPEC+ cut pledges now stand at 3.66 million bpd
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Oil could jump $10 a barrel - analyst
(Adds U.S. reaction)
By Maha El Dahan and Ahmed Rasheed
DUBAI, April 2 (Reuters) - Saudi Arabia and other OPEC+
oil producers on Sunday announced further oil output cuts of
around 1.16 million barrels per day, in a surprise move that
analysts said would cause an immediate rise in prices and the
United States called inadvisable.
The pledges bring the total volume of cuts by OPEC+, which
groups the Organization of the Petroleum Exporting Countries
with Russia and other allies, to 3.66 million bpd according to
Reuters calculations, equal to 3.7% of global demand.
Sunday's development comes a day before a virtual meeting of
an OPEC+ ministerial panel, which includes Saudi Arabia and
Russia, and which had been expected to stick to 2 million bpd of
cuts already in place until the end of 2023.
Oil prices last month fell towards $70 a barrel, the
lowest in 15 months, on concern that a global banking crisis
would hit demand. Still, further action by OPEC+ to support the
market was not expected after sources downplayed this prospect
and crude recovered towards $80.
The latest reductions could lift oil prices by $10 per
barrel, the head of investment firm Pickering Energy Partners
said on Sunday, while oil broker PVM said it expected an
immediate jump once trading starts after the weekend.
"I expect the market to open several dollars higher ...
possibly as much as $3," said PVM's Tamas Varga. "The step is
unreservedly bullish."
Top OPEC producer Saudi Arabia said it would cut output by
500,000 bpd. The Saudi energy ministry said the kingdom's
voluntary reduction was a precautionary measure aimed at
supporting the stability of the oil market.
"OPEC is taking pre-emptive steps in case of any possible demand reduction," Amrita Sen, founder and director of Energy Aspects, said. Last October, OPEC+ had agreed to an output cut of 2 million bpd from November until the end of the year, a move that angered Washington as tighter supply boosts oil prices.
The U.S. has argued that the world needs lower prices to support economic growth and prevent Russian President Vladimir Putin from earning more revenue to fund the Ukraine war.
The Biden administration said it sees the move announced by the producers on Sunday as unwise. "We don't think cuts are advisable at this moment given market uncertainty - and we've made that clear," a spokesperson for the National Security Council said.
STARTS IN MAY
The voluntary cuts start from May and last until the end of
the year. Iraq will reduce its production by 211,000 bpd,
according to an official statement.
The UAE said it would cut production by 144,000 bpd, Kuwait
announced a cut of 128,000 bpd while Oman announced a cut of
40,000 bpd and Algeria said it would cut its output by 48,000
bpd. Kazakhstan will also cut output by 78,000 bpd.
Russia's Deputy Prime Minister Alexander Novak also said on
Sunday that Moscow would extend a voluntary cut of 500,000 bpd
until the end of 2023. Moscow announced those cuts unilaterally
in February following the introduction of Western price caps.
An OPEC+ source said Gabon would make a voluntary cut of
8,000 bpd and not all OPEC+ members were joining the move as
some are already pumping well below agreed levels due to a lack
of production capacity.
After Russia's unilateral reductions, U.S. officials said
its alliance with other OPEC members was weakening, but Sunday's
move shows the cooperation is still strong.
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Surprise production cuts Oil prices just recently pass 5-month lows INSTANT VIEW-OPEC output cuts to roil markets, little room for
others to respond ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Maha El Dahan, Ahmed Rasheed, Dmitry Zhdannikov
and Adam Makary, additional reporting by Alex Lawler, Ahmad
Ghaddar and Gary McWilliams, writing by Alex Lawler, Editing by
Hugh Lawson, Sharon Singleton and Philippa Fletcher)
