Saudi Arabia says oil production cuts to be rolled over into second quarter 

OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, has decided to prolong its voluntary oil production cuts into the second quarter, as announced by Saudi Arabia's official press agency on Sunday. 

This extension was widely anticipated and indicates that the producers are deliberately taking their time to reintroduce the previously cut volumes back into the market, amidst uncertainties surrounding demand forecasts, analysts said. 

The Saudi press agency, quoting a source in the kingdom’s Energy Ministry, reported that Saudi Arabia would continue its voluntary cut of 1 million barrels per day, which was implemented in July 2023, through the end of the second quarter, in coordination with select OPEC+ members. 

New oil production cuts add to those already in place 

This reduction is on top of an already existing cut of 500,000 barrels per day by Saudi Arabia, which is set to last until the end of the current year. 

Giacomo Romeo, an analyst at Jefferies, told MarketWatch:  

[The announcement] does not come as a surprise. However, the decision sends a message of cohesion and confirms that the group in not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual (we expect in 3Q, as demand gets seasonally stronger).

The possibility of extending the cuts beyond the second quarter is still uncertain, with the next OPEC+ meeting in early June expected to be a critical point of focus, according to Romeo. 

Cuts add to oil price pressures  

These ongoing cuts, which began in late November, have led to an increase in oil prices, though they remain significantly below the peaks reached in the fall of 2023. Despite geopolitical tensions, including the war between Israel and Hamas, as well as recurring Houthi attacks on tankers in the Red Sea, oil prices have not surged back to those levels. 

Oil prices saw an uptick last week, with May Brent futures closing at $83.55 a barrel on ICE Futures Europe on Friday. 

Brent crude has risen by 8.5% in 2024 but is still over 13% below its 52-week high. Similarly, May West Texas Intermediate crude finished the week at $79.97 a barrel on the New York Mercantile Exchange, up by 11.6% for the year but 14.6% below its annual high. 

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