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OPEC+ surprises with voluntary cuts of 1.15m bpd starting in May

Saudis cite need for stable oil market, as move shows group's bond with Russia

An oil rig used in drilling at the Zubair field in the Iraqi city of Basra. Iraq intends to cut production by 211,000 barrels per day, while Saudi Arabia plans a reduction of 500,000 bpd.   © Reuters

DUBAI (Reuters) -- Saudi Arabia and other OPEC+ oil producers on Sunday announced voluntary cuts to their production amounting to around 1.15 million barrels per day in a surprise move they said was aimed at supporting market stability.

The group had been largely expected to stick to its already agreed 2 million bpd cuts when its ministerial panel, which includes Saudi Arabia and Russia, meets virtually on Monday.

Last October, OPEC+, which comprises the Organization of Petroleum Exporting Countries and allies led by Russia, agreed on output cuts of 2 million bpd from November until the end of the year, angering 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.

Sunday's unexpected voluntary cuts, which start in May, come in addition to the ones already agreed to in October.

Riyadh said it would cut output by 500,000 bpd while Iraq will reduce its production by 211,000 bpd, according to official statements.

The United Arab Emirates 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.

Russian 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.

After Russia's unilateral reductions, U.S. officials said Moscow's alliance with other OPEC members was weakening, but Sunday's move shows the cooperation is still strong.

The Saudi energy ministry said in a statement that the kingdom's voluntary cut was a precautionary measure aimed at supporting the stability of the oil market.

Oil prices fell to 15-month lows recently in response to the banking crisis that followed the collapse of two U.S. lenders and resulted in Credit Suisse being rescued by Switzerland's biggest bank, UBS.

"OPEC is taking preemptive steps in case of any possible demand reduction," Amrita Sen, founder and director of Energy Aspects, said on Sunday.

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