Saudi Arabia is cutting oil production. Why’s that?
OPEC and its partners employed strict production discipline to ensure oil prices’ fast recovery. The sector managed to soar relatively high after plummeting down to historic lows in 2020. OPEC and its non-OPEC partners, aka OPEC+, even reached a favorable agreement to start curbing production cuts from May 2021. The oil price is rising gradually despite that decision.
OPEC+ plans to allow an additional 350,000 barrels per day to join the markets starting next month, with another 350,000 coming in June, as well as 450,000 barrels per day slated for July. Meanwhile, OPEC is holding back just over 7 million barrels per day presently. Saudi Arabia is voluntarily cutting an additional 1 million barrels per day.
Overall, OPEC has taken on voluntary cuts of 1 million barrels per day since the beginning of February. A year ago, Riyadh and Moscow failed to secure the Kingdom’s agreement on deep supply cutbacks. The two countries argued that it would help to cope with declining oil demand leading to a supply glut and oil prices moving into negative territory for the first time in history. However, it seems, Saudi Arabia made a sharp turnaround regarding its initial stand on the matter.
Still, some analysts seem astonished with this new development, considering that Saudi Arabia has some of the lowest production costs worldwide. Others suggested that the Kingdom may be planning to curb supply over the coming years in a bid to boost oil prices.
India became the largest buyer of crude oil from the U.S. in the first quarter of 2021
While Saudi Arabia plans to cut production, U.S. companies attempt to gain more clients and further extend their trade in foreign countries. According to the latest reports, India has become the largest buyer of crude oil from the United States in the first quarter of 2021, surpassing China. The country has been buying an average of 4,21,000 barrels per day (BPD) during the last several months from U.S. oil companies.
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