- OPEC+ caught the market off guard by slashing its daily oil production by more than 1 million barrels, deviating from its earlier commitment to maintaining supply and potentially creating a new risk to the global economy. Saudi Arabia spearheaded the move by announcing its own 500,000 barrel-a-day reduction. Other members such as Kuwait, the United Arab Emirates, and Algeria followed suit, while Russia extended its ongoing production cut until the end of 2023.
- Starting next month, the cuts will reduce daily production by around 1.1 million barrels, and from July, due to the extension of Russia's current supply reduction, there will be about 1.6 million fewer barrels of crude oil in the market than previously expected. Russia's decision to decrease production came in response to western sanctions triggered by its incursion into Ukraine in March.
Why it matters
The decision to cut oil production may worsen the tense relationship between Saudi Arabia and the U.S. The Biden administration disapproved of the cuts, while Saudi Arabia claimed they were necessary to stabilize the market. The two nations have had a complicated relationship since last year, when the U.S. unsuccessfully urged Saudi Arabia to increase oil output.