Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman al-Saud arrives for the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna on June 3, 2023.
Joe Clamar | Afp | fake images
The influential Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, made no changes on Sunday to their planned oil production cuts for this year as coalition president Saudi Arabia announced further declines. volunteers.
OPEC+ also announced in a statement that it will limit combined oil production to 40.463 million barrels per day during January-December 2024.
Previously, the alliance agreed to a 2 million barrel per day decrease in October. Some OPEC+ members also announced some voluntary drops of just over 1.6 million barrels per day in April. Russia’s Deputy Prime Minister Alexander Novak said on Sunday that all voluntary cuts, which were initially set to expire after 2023, will now be extended until the end of 2024, in comments reported by Reuters.
Saudi Arabia’s energy ministry said Riyadh will implement an additional voluntary cut of 1 million barrels a day for a month from July, which may be extended. This will bring the kingdom’s total voluntary drawdowns to 1.5 million barrels per day over the period, halting its production to 9 million barrels.
The move by the 23-country alliance follows contentious talks that lasted well into Saturday night, as well as a more than four-hour Sunday meeting of the alliance’s Joint Ministerial Monitoring Committee, which recommends but does not implement , policy.
At stake for OPEC+ is a battle to reconcile a tighter supply outlook in the second half of the year, ongoing macroeconomic and inflation concerns, and inter-group diplomacy.
Before the meeting, Saudi Oil Minister Prince Abdulaziz bin Salman warned oil market speculators in late May to “be careful”, in a comment widely interpreted as harbinger of another supply cut.
It remains to be seen whether the 2024 production cut will offer long-term support to current oil futures prices when markets open on Monday, after months of pressure from the global financial crisis since the beginning of the year.
Brent futures it most recently settled at $76.13 a barrel on Friday, with several OPEC+ delegates noting the widening gap between prices and supply-demand fundamentals.
back to basics
The alliance of producers also agreed to review the baselines, the initial level from which producers reduce their production during OPEC+ agreements, generally by a similar percentage, by 2025, after a study of the production capacities of the producers. countries by oil analysts IHS, Wood Mackenzie and Rystad Energy. .
A higher baseline translates to a higher production ceiling. Critically, baselines are often reused in new iterations of OPEC+ deals and their subsequent review and adjustment are often contentious, meaning they could bind producers in the longer term.
OPEC heavyweight UAE has long been in the running for an upward revision to its baseline, receiving part of that concession in July 2021.
Meanwhile, other producers in the alliance, such as Angola and Nigeria, have failed to increase their production to their assigned OPEC+ quotas amid sabotage, capacity depletion and a lack of investment, but potential changes to their lines Baselines to reflect these realities were not formally addressed earlier because of the sensitivity of these discussions, delegates told CNBC.