OPEC’s top producer and the world’s top oil exporter, Saudi Arabia, has already started cutting its oil production ahead of the official start of the new OPEC+ pact on May 1, Bloomberg reported over the weekend, citing an industry official with knowledge of the issue.
According to Bloomberg’s source, the Kingdom’s oil giant Aramco has begun cutting oil production from around 12 million bpd, aiming to reach the 8.5 million bpd quota under the OPEC+ production cut deal intended to remove a total of 9.7 million bpd from the market in May and June.
Last week, OPEC’s fourth-largest producer, Kuwait, said that it had already started to reduce crude oil supply to international markets, “sensing a responsibility responding to market conditions,” Kuwait’s Oil Minister Khaled Al-Fadhel told the official state Kuwait News Agency (KUNA).
Oil production in Russia, the leader of the non-OPEC group of producers which also pledged to cut production to 8.5 million bpd, from a baseline level of 11 million bpd, had not changed in April as of April 24, and the question remains whether Moscow will live up to its OPEC+ output cut pledge.
Russia, however, is preparing to significantly reduce the oil supply to the market from its Baltic and Black Sea ports—to the lowest in two decades in May. While Russia is likely to struggle to hit its reduction target, the slashed exports from the European seaports suggest that Moscow will be limiting the oil supply to international markets at a time when global inventories of crude and gasoline threaten to overflow amid the massive demand collapse in the pandemic.
Analysts, however, think that the OPEC+ cuts would be too little too late to support the market, considering that the current demand loss stands at around 30 million bpd—three times the cuts promised by OPEC and its allies.
Oil prices plummeted again on Monday, with WTI Crude crashing by 23 percent to just $13 a barrel at 2:30 p.m. EDT.
