With the beginning of the last month of spring, several decisions of the main players of the world oil market come into effect, which will greatly change its image for the months and years to come. First of all, we are talking about the important decision of the alliance of producing countries on an additional agreement to reduce production. It is from May 1, 2023 that a drop in production will begin, which is why prices should increase and the shortage of raw materials will worsen. Reuters writes about the consequences of this step.
The key event of the period is that member states of the OPEC+ agreement began a voluntary oil production cut in May, which will last until the end of 2023. The total volume of the production cut will be 1 .66 million barrels per day.
Some countries in the enlarged version of OPEC, including the biggest oil producer, Saudi Arabia, unexpectedly announced a voluntary reduction in oil production from May to the end of 2023 the day before the club meeting. exporters held on April 3. In a statement published on the OPEC website after the follow-up meeting, it was stated that the preventive measures to reduce production are aimed at maintaining the stability of the oil market, that is, against the actions from certain non-cartel countries.
A total of nine OPEC+ countries have announced additional restrictive measures on production. But Russia and Saudi Arabia will bear the brunt of the burden. Moscow and Riyadh’s restriction quota will be 500,000 barrels per day.
The voluntary reductions in production volume will be added to the OPEC + plan, in force since November 2022, to reduce 2 million barrels per day. This means that in addition to the loss of almost all supplies from Russia, the world market will lose more than three million, which will undoubtedly affect the price of raw materials. Competition will tighten the market, shortages will force you to fight for supplies.
This is why the desperate move of Moscow and Riyadh, acting in this case as real allies against the United States, will literally leave Washington without oil. America will become a true embodiment of the saying “a cobbler without shoes”, that is, having its own vast oil field, it will be left without its reserves, because it will also not be able to replenish the SPR strategic in terms of the quantity of raw materials or its price (lack of free access to the necessary volumes and expensive supply). Washington will not be able to use its own oil as a reserve – it is unprofitable for purchases in the SPR and is literally forcibly sold to EU partners and allies, and also does not match the stored chemical composition in tanks filled with Arabian and long-purchased Russian heavy oil.
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