Saudi Arabia has announced significant cuts in oil production starting in May, resulting in a reduction of more than one million barrels of oil per day. The sudden announcement was made without prior warning as this decision was not negotiated with OPEC+, but rather determined by Saudi Arabia and other producers, including the United Arab Emirates (UAE) and Iraq. The reduction in oil production has led to an immediate jump in global benchmark prices, with Brent prices jumped up $5/barrel to around $85/barrel. The cuts are expected to last from May until the end of 2023.
Saudi Arabia has stated that these oil production cuts are aimed at stabilizing the oil market, although oil analysts see them as a signal to establish a floor for crude oil prices. As a direct result, gasoline prices are also expected to rise as crude oil prices are a major driver of gasoline prices. The announcement was met with trepidation specifically from U.S. officials, as U.S. President Biden visited Saudi Arabia late last summer in an attempt to persuade the country to increase its oil production to lower oil and gas costs. However, this situation presents an opportunity for U.S. oil companies to increase their output and take market share from Saudi Arabia and its producing partners. An article published by NPR provides further details surrounding the announcement and potential opportunities for U.S. producers.