Oil powers announce surprise cuts

RIYADH — Major oil powers led by Saudi Arabia announced on Sunday a surprise production cut of more than 1 million barrels per day, calling it a "precautionary" move aimed at stabilizing the market.

The reductions, on top of a Russian decision to extend a cut of 500,000 barrels per day, and despite US calls to increase production, risk stoking inflation and pressure to raise interest rates.

Cuts by Saudi Arabia, Iraq, Kuwait, Algeria, Oman and the United Arab Emirates from May to the end of the year will top 1 million barrels per day — the biggest reduction since the OPEC+ cartel slashed 2 million barrels per day in October.

Russia, a leading member of the OPEC+ cartel, said it was also extending an existing cut of 500,000 bpd to the end of this year, describing it as "a responsible and preventive action".

Oil prices soared almost 6 percent in Asian trade on Monday morning, with West Texas Intermediate jumping by 5.74 percent to $80.01 a barrel and Brent climbing 5.67 percent to $84.42.

A Saudi energy ministry official emphasized that this is a precautionary measure aimed at supporting the stability of the oil market, the official Saudi Press Agency reported.

The cuts follow a drop in oil prices triggered by jitters over the banking sector, following the collapse of US lender Silicon Valley Bank and UBS' hurried buyout of troubled rival Credit Suisse, UAE-based oil expert Ibrahim al-Ghitani told Agence France-Presse.

Brent crude oil prices, trading just below $80 a barrel late last week, should bounce to above $80 as a result of the reductions, he said, calling prices below $80"unacceptable" for OPEC+.

Saudi Arabia will cut 500,000 barrels per day, Iraq — 211,000, the UAE — 144,000, Kuwait — 128,000, Algeria — 48,000, and Oman — 40,000, each country announced.

The reductions ignore calls from the United States to raise production as consumption rises.

"As world economies recover, we'll see more consumption. And therefore, we'd like to see supply meet demand," Jose Fernandez, US undersecretary of state for Economic Growth, Energy and the Environment, said on the sidelines of the CERAWeek energy conference in Houston, Texas, last month.

US President Joe Biden has regularly called for an increase in the OPEC+ output since the Russia-Ukraine conflict early last year sent prices soaring to above $120 a barrel.

After the cut in October, which preceded the US midterm elections, he warned of "consequences" for Saudi Arabia, a long-standing ally.

Agencies via Xinhua