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.
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The influential organization of the oil exporting countries (OPEC) and its allies, known as OPEC+, on Sunday made no changes to its planned oil production cuts for this year. , when the Saudi Arabian coalition president announced a further voluntary reduction.
OPEC+ also announced in a statement that it will limit its combined oil production to 40,463 million barrels per day between January and December 2024.
Previously, the alliance agreed to reduce 2 million bpd in October. Some OPEC+ members also announced some voluntary drops just over 1.6 million barrels per day in April. Russian Deputy Prime Minister Alexander Novak said on Sunday that all voluntary cuts, originally set to expire after 2023, will now be extended until the end of 2024, in comments seen by Reuters. news.
Asked if Russia, sanctioned by the West, would live up to its pledge to cut production, UAE Oil Minister Suhail al-Mazrouei on Sunday acknowledged there was a discrepancy between the figures provided by Moscow and Independent Russian production estimates by analysts and trade publications.
“Some of the things that we’ve seen from Russia on a technical basis just… [don’t] compiled from several independent sources and we will contact those independent sources,” he said at a press conference after the OPEC+ meeting.
Saudi Arabia’s energy ministry said Riyadh will implement an additional voluntary cut of 1 million barrels per day starting this July, which can be extended. This would bring the kingdom’s total voluntary reductions to 1.5 million barrels per day for the period, limiting its output to 9 million barrels.
Saudi Arabia’s energy minister described the kingdom’s extra voluntary cut of 1 million barrels per day as a “Saudi Arabia lollipop” and insisted it would be done. .
“We always honor our commitments,” he said at a press conference on Sunday. He did not respond to whether the kingdom would extend the voluntary cuts beyond July.
The move by the 23-nation coalition comes after contentious negotiations that lasted until Saturday night, as well as a more than four-hour meeting on Sunday of the Union’s Joint Ministerial Oversight Committee. policy, which recommends, but does not implement, the policy.
The threat to OPEC+ is the battle to reconcile the prospect of tighter supply in the second half of the year, the current macroeconomic and inflationary concerns, as well as the diplomacy between the groups.
Ahead of the meeting, Saudi oil minister Prince Abdulaziz bin Salman at the end of May warned oil market speculators to “beware”, in a comment widely read as heralding a cut. another decrease in supply.
It remains to be seen whether the 2024 production cuts will provide lasting support to current oil futures prices when the market opens on Monday, after months of pressure from global financial turmoil since the beginning. year.
Brent futures contract most recently stabilized at $76.13 a barrel on Friday, with some OPEC+ delegates noting the deepening divide between prices and supply-demand fundamentals.
The producers’ union also agreed to consider baselines – the starting level at which producers cut their output in OPEC+ deals, often by the same percentage – for 2025. , following a study of countries’ production capacity by oil analysts IHS, Wood Mackenzie and Rystad Energy.
A higher baseline translates to a higher output ceiling. Importantly, baselines are often reused in new iterations of the OPEC+ agreements, and their subsequent review and adjustment is often controversial, meaning they can be binding. longer-term manufacturers.
OPEC’s United Arab Emirates has long competed for an upward revision to its baseline, receiving a portion of such concessions in July 2021.
The alliance’s other producers, such as Angola and Nigeria, meanwhile, have long been unable to raise their output to their assigned OPEC+ quota amid sabotage, energy exhaustion underinvestment and effort – but potential changes to their baselines to reflect these realities have not been formally addressed before because of the sensitivity of these discussions, delegates told CNBC.