Several OPEC+ nations announced they will “voluntarily” cut oil production, which they said is “aimed at supporting the stability of the oil market.”
Most notably, Saudi Arabia said Monday that it will reduce oil production by 500,000 barrels per day starting at the end of May through the rest of 2023.
In the hours following the announcement, oil prices jumped. By early Monday morning, oil prices were 5% higher. The cost of crude oil is a major factor in determining gas prices, which have hovered between $3 and $3.50 since November.
A year ago, the national average for gas prices peaked at over $5 a gallon.
According to federal data,oil prices topped $120 a barrel last spring before steadily dropping to a low of $66 a barrel in recent weeks.
Oil giant Saudi Aramco makes a historic $161B profit in 2022
The monster profit by the firm came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022.
The latest decision comes after OPEC+ said in October it would cut production by 2 million barrels per day back. OPEC+ comprises 13 major oil-producing nations plus several other non-member nations that participate in the group’s policy objectives.
The U.S. gets about 11% of its oil from these nations, but much of the world relies on oil produced by OPEC+ nations, the Department of Energy says.
According to federal data, Saudi Arabia is the world’s second-largest producer of oil. The U.S. is the top producer of oil.
The U.S. produced 12.46 million barrels of oil per day in January, the highest number since March 2020, according to Department of Energy data. U.S. production dropped during the pandemic.
But the amount is still far higher than past years. In the middle of 2002, the U.S. produced about 5.8 million barrels of oil per day. A decade later, that figure increased to about 6.2 million barrels, according to U.S. data.
