Russia, a non-member of the Organisation of Petroleum Exporting Countries (OPEC+) and Nigeria, an OPEC member country, accounted for most of the oil production drop.
Declines in Russian and Nigerian oil production accounted for 440,000 bpd, or two-thirds, of the last month’s drop in OPEC+ output, according to Energy Intelligence.
OPEC+ producers saw the biggest decline in their collective production in 10 months, as output fell by 680,000 barrels per day (bpd) to 37.64 million bpd.
Meanwhile, oil prices rose about two per cent yesterday with support from a weaker dollar and hopes that the Federal Reserve might ease up on its policy tightening after a key U.S. inflation report this week, though concerns remain over Chinese demand.
Brent crude futures rose $1.35, or 1.6 per cent, to $85.53 a barrel. U.S. West Texas Intermediate futures rose $1.75, or 2.2 per cent, to $81.49 a barrel.
The dollar weakened on hopes that the U.S. Federal Reserve is getting closer to ending its cycle of interest rate hikes, making dollar-priced oil cheaper for buyers holding other currencies.
According to Energy Intelligence, last month, oil production from the OPEC+ group fell to levels last seen in May 2022, with the alliance 2.5 million bpd below its targeted collective production quota. That is the largest gap between overall quota and actual production since October last year.
Just after the end of March, several major OPEC+ producers, led by the top producers in the Middle East, announced on April 2 a total of 1.16 million bpd of fresh production cuts between May and December this year.
Saudi Arabia, OPEC’s de facto leader and top global crude exporter, will cut 500,000 bpd and said that the move was “a precautionary measure aimed at supporting the stability of the oil market”.
Apart from Saudi Arabia, OPEC heavyweights Iraq, the United Arab Emirates (UAE), and Kuwait, plus OPEC’s Algeria and Gabon, and non-OPEC Oman and Kazakhstan, announced the 1.16 million bpd cut. That’s on top of Russia’s 500,000 bpd cut which was extended until the end of the year.
From within OPEC, Iraq is set to cut 211,000 bpd of its supply, the UAE – 144,000 bpd, and Kuwait – 128,000 bpd. Added to the Saudi cut of 500,000 bpd, nearly one million bpd of supply from the Middle East will disappear from the market as of next month.