oil production benefit Russia || تیل کی پیداوار سے روس کو فائدہ

oil production benefit Russia || تیل کی پیداوار سے روس کو فائدہ . OPEC+ members announced an additional 1.16 million barrels per day cut, led by Saudi Arabia.

 oil production benefit Russia || تیل کی پیداوار سے روس کو فائدہ
How new cuts in oil production will benefit Russia. —AFP/file

LONDON: The unexpected announcement by several OPEC+ members to cut their oil production by more than a million barrels per day beginning in May has sent global oil prices soaring, in what is widely perceived as a tightening of Russia-Saudi Arabia ties.

Here’s what you need to know about the decision made on Sunday by some OPEC members and their allies:

Why cut oil production even more?

  • OPEC+’s eight members, led by Saudi Arabia, announced an additional 1.16 million barrels per day cut until the end of the year, in addition to the overall OPEC+ output policy.
  • It came after another OPEC+ member, Russia, decided to extend a 500,000-barrel-per-day cut.
  • “We see an OPEC+ group that is adaptable and agile, willing and able to act ahead of the curve,” SEB analyst Bjarne Schieldrop said.
  • OPEC was founded in Vienna in 1960 with the goal of ensuring “fair and stable prices for producers” through “coordination and unification of petroleum policies” among its members.
 oil production benefit Russia || تیل کی پیداوار سے روس کو فائدہ
  • The OPEC+ alliance was formed in 2016 by non-OPEC oil-producing countries led by Russia.
  • Oil prices have suffered greatly as a result of the US and European banking crises, with fears of a global recession resurfacing and investors shifting away from riskier assets such as commodities.
  • “To the chagrin of world leaders,” SPI AM analyst Stephen Innes said, “OPEC has decided to draw a hard line at $80 per barrel for self-serving economic interests.”

How will the decision benefit Moscow?

  • According to Schieldrop, the rise in crude oil prices benefits Russia in particular, as the country “needs oil money for its expensive war in Ukraine.”
  • He went on to say that the cuts “will tighten up the oil market, allowing Russia to secure better prices for the crude oil it sells.”
  • Russia has seen its crude export revenues capped and the markets where it can sell limited as a result of numerous Western sanctions imposed for invading Ukraine.
  • According to Schieldrop, the new cuts also demonstrate that “Russia is still an integral and important part of the group.”
  • The implications of Sunday’s decision are magnified because, unlike previous cuts made by the group at the height of the pandemic or last October, “the momentum for global oil demand According to Innes, “the trend is up, not down,” with China expected to recover strongly.
  • Prices were immediately affected, with the two global crude benchmarks rising by about 8% in early Monday trading.
  • The unexpected reduction strengthens the Saudi-Russian marriage of convenience by aligning their production levels and putting them on a level playing field.

Is this a slap in the face to Washington?

  • The White House dismissed the output cut, claiming it would have little effect on the US economy.
  • “Given market uncertainty,” National Security Council spokesman John Kirby told reporters, “we do not believe that production cuts are appropriate at this time.”
  • In response to a question about Riyadh, Kirby stated that the kingdom “is still a strategic partner,” but that “we don’t always see eye to eye on everything.”
  • He added that the latest production cuts were not completely unexpected by the US government: “We were given a heads up.”
  • The cuts are a “provocation for oil-consuming countries dealing with rising interest rates and high inflation figures,” according to DNB analysts.
  • They also signal the beginning of a new era in which “the Saudis are not afraid of the US,” according to Finalto analyst Neil Wilson, because OPEC “leverage” is on Riyadh’s side.
  • “The Saudis are acting responsibly,” he said, adding that a “recasting of regional and global dynamics” has already begun.
  • DNB analysts concluded, “OPEC+ has sent a clear signal that… it does not see increased shale oil production as a threat to its market share.”
  • The alliance’s production cuts will not result in any market share losses due to the slowing growth of US shale oil production.
  • According to DNB analysts, “more political wrangling between the US and OPEC is likely,” but the Biden administration will not use “SPR (strategic petroleum reserve) inventories to offset OPEC cuts.”


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