Saudi 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 | Getty Images
The influential Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, made no changes to its planned oil production cuts for this year on Sunday, as the President of the coalition, Saudi Arabia, announced further voluntary cuts.
OPEC+ also announced in a statement that it would limit combined oil production to 40.463 million barrels per day from January to December 2024.
Previously, the alliance had agreed to a cut of 2 million barrels per day in October. Some OPEC+ members have also announced voluntary cuts just over 1.6 million barrels per day in April. Russian Deputy Prime Minister Alexander Novak said on Sunday that all voluntary cuts, which were originally due to expire after 2023, will now be extended until the end of 2024, in comments reported by Reuters.
Asked if Russia, hit by Western sanctions, would keep its promise to cut production, the United Arab Emirates’ oil minister, Suhail al-Mazrouei, admitted on Sunday that there were discrepancies between the figures provided by Moscow. and independent Russian production estimates from analysts and trade publications.
“Some of the things we’ve seen from Russia on a technical basis…(doesn’t) match some of the independent sources, and we will contact those independent sources,” he told a news conference. briefing after the OPEC+ meeting.
Saudi Arabia’s energy ministry said Riyadh will implement an additional month-long voluntary reduction of 1 million barrels per day starting in July, which can be extended. This will bring the kingdom’s total voluntary declines to 1.5 million barrels per day over the period, limiting its production to 9 million barrels.
Saudi Arabia’s energy minister has described the kingdom’s additional voluntary reduction of one million barrels per day as a “Saudi lollipop” and stressed that it will be implemented.
“We have always honored our commitments,” he said during Sunday’s press briefing. He left unanswered whether the kingdom will extend its voluntary reduction beyond July.
The decision by the 23-nation alliance follows contentious talks that dragged on late into the night on Saturday, as well as a more than four-hour meeting on Sunday of the alliance’s Joint Ministerial Oversight Committee, which recommends, but does not implement, the policy.
At stake for OPEC+ is a battle to reconcile a tighter supply outlook in the second half of the year, current macroeconomic and inflationary concerns and cross-group diplomacy.
Ahead of the meeting, Saudi Arabia’s Oil Minister Prince Abdulaziz bin Salman warned speculators in the oil market in late May to “be careful”, in a comment widely read as announcing a further cut in supply.
It remains to be seen whether the 2024 production cut will provide long-term support for current oil futures prices when markets open on Monday, following months of pressure from the global financial crisis since the start of the crisis. year.
Brent futures recently stood at $76.13 a barrel on Friday, with several OPEC+ delegates noting the widening gap between prices and supply and demand fundamentals.
The producers’ alliance also agreed to revise reference levels – the starting level from which producers cut production during OPEC+ deals, usually by a similar percentage – for 2025, following a study of countries’ production capacities by oil analysts IHS, Wood Mackenzie and Rystad Energy. .
A higher baseline translates to a higher production cap. Crucially, baselines are often reused in new iterations of OPEC+ deals and their review and subsequent adjustment are often contentious, meaning they could bind producers in the longer term.
OPEC heavyweight the United Arab Emirates has long been in contention for an upward revision to its benchmark, receiving part of such a concession in July 2021.
Meanwhile, other producers in the alliance, such as Angola and Nigeria, have failed to increase production to the OPEC+ quotas allocated to them amid sabotage, capacity depletion and underinvestment — but potential changes to their baselines to reflect those realities have not been formally addressed before because of the sensitivity of those discussions, the delegates told CNBC.