By reducing output, Saudi Arabia projects decisive OPEC role | John Kemp

By reducing output, Saudi Arabia projects decisive OPEC role | John Kemp

LONDON - Saudi Arabia's announcement that it will reduce oil output by 1 million barrels per day in February and March has boosted prices and helped paper over divisions within the producer alliance, at least temporarily.

The unilateral cut, announced on Tuesday, reaffirms Saudi Arabia, rather than the Organisation of the Petroleum Exporting Countries (OPEC) or the wider OPEC+ alliance, is the true swing producer in the oil market.

The unilateral cut was not widely anticipated, and marks a shift from Saudi Arabia's previous insistence of not acting alone, but it has a number of advantages for the kingdom at this point:

* By acting unilaterally and presenting the reduction as voluntary, Saudi Arabia has maintained a united front with other OPEC members and Russia, leader of the OPEC+ partners, despite disagreements over strategy.

* The cut should allay criticism from other members of OPEC+, including the United Arab Emirates, that Saudi Arabia's production baseline from which previous cuts were calculated was too high.

* The cut burnishes Saudi Arabia's credentials as a responsible market manager, at a crucial moment when the kingdom needs to build an effective diplomatic relationship with the incoming Biden administration in the United States.

* The cut should offset the risk of