Oil Prices Surge as OPEC Extend Production Cuts

OPEC and its allies said on Thursday that they will largely extend production cuts through April, however, Russia and Kazakhstan have been granted exemptions to slightly increase their production.

Last month, OPEC+ agreed to keep production stable for February and March while, Saudi Arabia pledged to cut its production by an additional 1 million barrels per day, a move that reflected fragile demand.

Meantime, Saudi Arabia agreed to extend the additional cut until April.

Recently, higher oil prices have made producers more confident that cuts would put the market on a solid footing in the wake of the COVID-19 crisis, however. The supply cut is around 8 million bpd, including the additional Saudi cut.

Saudi Energy Minister Abdulaziz bin Salman said, in a press conference: "When you have unpredictability and uncertainty, I think there are options you can make. I belong to the conservatism school and I take things more cautiously. I will believe in the recovery of the market, when I see it."

Last year, OPEC+ slashed output by a record-shattering 9.7 million barrels per day. The emergency steps, along with production cuts by US and other producers, drove a strong rebound in prices. That recovery has accelerated in recent months as millions of people around the world have been vaccinated against Covid, allowing restrictions to be slowly eased.

Last year, OPEC + cut production by 9.7 million barrels per day leading to a strong price recovery. This recovery has accelerated in recent months due to mass vaccinations worldwide.