Saudi Arabia enhanced their commitment to OPEC+ supply cuts as the Kingdom said they’d shut production of additional 1 million barrels of crude oil per day next month. Most of the OPEC+ countries have already come close to compliance with the deal that took effect this month and cuts from non-member states like Norway, Brazil, Canada, and the US are compounding the already steep curbs on production. Though gasoline demand remains historically weak, commuters are beginning to head back to their offices, opting for the isolation of their personal vehicles and abandoning public transit.
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Crude Cuts Continue to Deepen
As part of its latest efforts to reign in the global glut of crude oil, Saudi Arabia’s energy ministry ordered the Kingdom’s oil giant Aramco to reduce its crude oil production in June “by an extra voluntary amount of one million barrels per day (bpd), in addition to the reduction committed by the Kingdom in the latest OPEC+ agreement,” the official Saudi Press Agency reported.
The 23-country OPEC/non-OPEC coalition known as OPEC+ agreed to cut output by 9.7 million bpd for two months from an agreed baseline level starting May 1. These countries will also cut 7.7 million bpd between July and December and 5.8 million bpd from January 2021 to April 2022.
Under this OPEC+ deal, Saudi Arabia has pledged to cut its oil production to 8.5 million bpd, beginning this month. With the voluntary additional reduction in June, the Saudis would produce 7.492 million bpd next month, down from more than 12 million bpd in April.
Russia, also committed to the OPEC+ syndicate, saw oil output fall to 8.75 million bpd in the first 5 days of May, just shy of the 8.5 million bpd target set for this month and next.
However, as executive director of the International Energy Agency (IEA) Faith Birol recently stated, non-OPEC+ reductions in output “may well be similar to reductions that will be coming from OPEC+ throughout the year… We are not yet there but we seeing some [production cuts] already.” Cuts from non-OPEC+ partners industries such as Brazil, Norway, Canada, and the United States, the total reduction in supply could double global output curbs to around 20 million bpd when fully-implemented.
Norway, Europe’s largest oil producer, said it would cut production by 250,000 bpd in June and by 134,000 bpd in the second half of the year.
Brazil’s Petrobras initially reduced output by 200,000 bpd, which accounts for 20% of Brazil oil exports, after shutting down production at 62 offshore platforms last month. However, those cuts have been partially reversed.
The most significant non-OPEC market to watch, however, is North America…