Oil prices rose on Monday, following the sudden announcement by several major exporting countries of a significant reduction in production, starting in May, with the aim of raising prices after their recent decline.

On Sunday , Saudi Arabia led a coordinated reduction in daily production for a number of major oil countries, despite pressure from the United States to increase production, in a move considered a "precautionary measure" to achieve "stability and balance" in the crude markets.

And Saudi Arabia, the Emirates, Kuwait, the Sultanate of Oman and Algeria decided in a coordinated manner to reduce their daily production by more than one million barrels per day in total, starting from next May until the end of this year, in the largest production cut since the decision of the Organization of Petroleum Exporting Countries and its partners in the “OPEC Plus” coalition in October. October 2022, reducing two million barrels per day.

Similarly, Russia, a member of the OPEC Plus alliance, announced that it would extend its crude oil production cut by 500,000 barrels per day until the end of 2023, referring to a "responsible and preventive measure."

But for analysts, this step is aimed specifically at reaping additional "revenue", as Jorge Leon of Rystad Energy said in a note.

He said that these cuts show that the OPEC Plus alliance will do everything in its power to "defend a lower price that remains well above $80 a barrel," despite criticism from the United States and other consuming countries worried about rising inflation.

Ibrahim Al-Ghitani, an energy expert residing in Abu Dhabi, pointed out that the voluntary cuts "come after Brent crude prices reached their lowest levels in two years last March, due to the crisis of some US banks."

"The drop in Brent price to less than $80 is an unacceptable level for OPEC Plus members," he told Agence France-Presse, pointing out that "producing countries adhere to a balancing level that supports their large financial budgets this year and their next economic plans."

After this coordinated action by the major oil producers, the market's reaction was immediate, and the price of the two reference oils in the world rose by about 8% at the beginning of trading, to return to their level before the banking sector turmoil in the United States.

At around 13:00 GMT, the price of Brent oil, the European reference for the North Sea, rose by about 5.77 percent, to reach $84.50 a barrel, and West Texas Intermediate oil by about 5.70 percent, to reach $79.98 a barrel.

Saudi Arabia will reduce its production by 500 thousand barrels per day, Iraq 211 thousand barrels, the UAE 144 thousand barrels, Kuwait 128 thousand barrels, Algeria 48 thousand barrels, and the Sultanate of Oman 48 thousand barrels, according to what each country announced.

And OPEC Plus announced that the total cuts will be "about 1.66 million barrels per day."
DNB analysts confirmed that "the majority of cuts will be made by countries producing at or above the level of their quotas," which means "actual supply cuts."

In response to Russia 24's questions, Russian Deputy Prime Minister in charge of energy affairs Alexander Nova said that other countries could also announce "cuts if they deem it necessary."

Unlike similar measures taken by OPEC Plus in the past with the spread of the Covid-19 epidemic or in view of recession fears, the decision to cut production was issued this time in light of the high global demand for oil.

China, a country that consumes oil in large quantities, has reopened its economy after adopting a strict policy to combat the epidemic.

This announcement comes in addition to a decision taken in October to reduce production by two million barrels per day. It was the largest cut since the outbreak of the COVID-19 pandemic.

This is a new setback for Washington, which calls for raising production in order to contain prices, says Caroline Payne of Capital Economics.

From a geopolitical point of view, these cuts show the group's "support for Russia," which will thus benefit from better prices to compensate for the impact of Western sanctions on it.

The Kremlin on Monday defended the decision, saying it was in the "interest" of global markets. Kremlin spokesman Dmitry Peskov said, "It is in the interest of world energy markets that world oil prices stay at a good level," adding, "Whether other countries are pleased with that or not is up to them."