On Sunday, Saudi Arabia and several major oil producers announced their plan to cut oil production by 1.15 million barrels per day, starting in May and ending in 2023. According to the Saudi Ministry of Energy , the move was coordinated with some members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members as a “precautionary measure” to stabilize the oil market.
Geopolitical Implications: The move to reduce oil production comes amid shifting alliances and tensions among major players
This weekend, Saudi Arabia and several major oil producers, including Russia, the United Arab Emirates (UAE), Iraq, Kuwait, Oman and Algeria, plan to reduce oil production in a total of 1.15 million barrels per day.
Saudi Arabia and Russia announced that each country would cut oil production by 500,000 barrels per day (bpd), while the United Arab Emirates will cut output by 144,000 bpd and Kuwait will cut output by 128,000 bpd.
The announcement of the decision of the oil superpowers to cut the supply follows the reductions made in October, when oil-producing nations announced a production decline of 2 million bpd. At the time, the Biden administration expressed anger and warned of “consequences.”
On Sunday, the White House answered to the surprise cuts, and a spokesman for Biden’s National Security Council said the United States does not think cutting production is wise.
The spokesperson also asserted that the Biden administration would continue to work with oil producers to keep prices low at the pump for American gas consumers. This news follows several reports in the last week indicating that several large nations are moving away from US dollar settlements.
According to Alexander Babakov, deputy chairman of the State Duma, the BRICS countries (Brazil, Russia, India, China and South Africa) plan to discuss the creation of a new reserve currency for the group of countries. In addition, China recently reached a bilateral agreement with Brazil that allows trade in their respective national currencies to buy liquefied natural gas (LNG).
Also, with China’s rapid growth, the BRICS block is now the world’s largest gross domestic product (GDP) group. Saudi Arabia and other major oil producers believe the production cut will help stabilize the oil market and is being implemented as a “precautionary measure,” according to Riyadh’s energy agency.
The data indicates that despite the oil production cut in October, Brent crude prices and other measures of oil per barrel have declined from $95 to $80 per barrel. Last October, Democratic politicians wanted cut ties with Saudi Arabia, eliminate troops of the region, and end arm sales.
What do you think about the implications of cuts in oil production by Saudi Arabia and other major oil producers? Do you think it will have a significant impact on world oil prices and the economy? Share your thoughts on this topic in the comments section below.
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