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OPEC+ on Sunday surprised oil markets with an announcement that it will reduce its output further, by some 1.16 million barrels daily.
Reuters noted in a report that with the new cut, the total output reduction amount from OPEC+ will come in at 3.66 million barrels daily, or 3.7% of global oil demand.
The Financial Times reported that oil prices had gained 8% immediately after the announcement, noting Saudi Arabia’s share of the cuts would be almost half of the total, at 500,000 bpd.
Russia, meanwhile, said it would extend the production cuts of 500,000 bpd it announced earlier this year until the end of 2023.
The FT noted the unusual nature of the announcement as it was made outside the group’s regular monthly meetings, the next of which is taking place today.
The U.S. administration expectedly criticized the move, saying it was not the time to cut production.
“We don’t think cuts are advisable at this moment given market uncertainty — and we’ve made that clear,” a spokesperson for the National Security Council said, as quoted by The Hill.
“But we’re focused on prices for American consumers, not barrels, and prices have come down significantly since last year, more than $1.50 per gallon from their peak last summer,” the spokesperson, who was not named in the Hill report, added.
The move by OPEC+ to curb production further came after the sharp drop in oil prices last month, largely driven by concern about the banking industry after a couple of sizeable bank collapses in the United States.
The events sparked concern about the stability of the Western banking system, reinforced by the near-death experience of Credit Suisse, and fear of a recession that would affect oil demand.
“OPEC is taking pre-emptive steps in case of any possible demand reduction,” Energy Aspects’ Amrita Sen told Reuters.
