Reflections 2023: Year of oil production cuts

In 2023, the oil markets exhibited distinctive features, with a pivotal factor being the prolonged production cuts enforced by OPEC+ (the Organization of the Petroleum Exporting Countries and its allies), collectively responsible for 40 per cent of the global oil supply.

In April 2023, OPEC+ announced additional cuts amounting to 1.65 million barrels per day (mbpd), supplementing the previously agreed-upon cuts of 2 mbpd from October 2022.

This cumulative reduction equated to approximately 3.66 mbpd, constituting roughly 3 per cent of global oil demand. The market responded positively to this announcement, leading to a rally in oil prices.

The momentum of this trend intensified in June 2023 when Saudi Arabia, a key player in OPEC and one of the world's top three oil producers, volunteered for additional cuts of 1 mbpd, citing the goal of supporting the stability and balance of oil markets. Consequently, oil prices surged to $97, marking a 25 per cent increase since June 2023.