UPDATED 1 Sept: The EI library in London is temporarily closed to the public, as a precautionary measure in light of the ongoing COVID-19 situation. The Knowledge Service will still be answering email queries via email , or via live chats during working hours (09:15-17:00 GMT). Our e-library is always open for members here: eLibrary , for full-text access to over 200 e-books and millions of articles. Thank you for your patience.
New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
Oil prices surged by more than 5%, with Brent trading above $84/b, after several of the world’s largest exporters announced surprise cuts in production at the end of last week.
Brent crude prices rose after Saudi Arabia, Iraq and several Gulf states announced they were going to cut oil output by more than 1mn b/d from May 2023. In addition, Russia said it planned to extend its already announced 500,000 b/d cut beyond June until the end of the year.
The members of the OPEC+ oil producers account for some 40% of global oil production. Saudi Arabia is reducing output by 500,000 b/d and Iraq by 211,000 b/d. The United Arab Emirates (144,000 b/d), Kuwait (128,000 b/d), Algeria (48,000 b/d) and Oman (40,000 b/d) also unveiled planned cuts, as did Kazakhstan (78,000 b/d).
According to the official Saudi Press Agency, a Saudi Energy Ministry spokesperson stated that the move was ‘a precautionary measure aimed at supporting the stability of the oil market’. The move was denounced by the UN National Security Council, who said that cuts were not advisable at this point in time given market uncertainties. Indeed, the US has been calling for oil producers to increase output in order to push energy prices lower and reduce cost-of-living pressures.
Commenting on the news, Jorge Leon, Senior Vice President at Rystad Energy consultancy, says: ‘If fully delivered, the announced cut would further tighten an already fundamentally tight oil market, driving the Brent benchmark towards $100/b sooner than previously expected and would push the price to around $110/b this summer.’
He continues: ‘The fact that all these countries are adhering to the current OPEC+ quotas, with compliance levels at close to 100%, implies that the announced voluntary cuts will also most likely be real. From a supply side perspective, the cuts signal the group is willing to defend a price floor well above $80/b and prioritise revenue versus market share. From a demand-side perspective, these cuts may be signalling that OPEC+ believes that there are enough recessionary indicators in the market. These recessionary indicators have been exacerbated by the ongoing strain on the banking industry which is weighing on the broader the financial sector.’
The latest reductions come on top of a 2mn b/d reduction in output announced by OPEC+ last October for the period November 2022 to December 2023.
