OPEC and Allies Extend Oil Production Cuts: Latest News and Analysis

2023-06-04 19:29:12

This voluntary reduction of around one million barrels per day applies from July and can be extendedSaudi Prince Abdulaziz bin Salman told a press conference after a meeting in Vienna of the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies led by the Russia.

In addition, the reductions introduced since the beginning of May by nine countries, including Riyadh and Moscow, for a total of 1.6 million barrels daily, are extended until the end of 2024Russian Deputy Prime Minister Alexander Novak told reporters at the exit.

In front of the press, the Saudi Minister of Energy was pleased to have spared suspense with this measure which he described as saudi treatof Cherry on the cake pour bring stability to a market extremely volatile.

In addition, the reductions introduced since the beginning of May by nine countries, including Riyadh, Moscow, Baghdad and Dubai, for a total of 1.6 million barrels daily, are extended until the end of 2024Russian Deputy Prime Minister Alexander Novak said at the exit.

The negotiations lasted several hours, with media reporting differences between the 23 participants, who represent 60% of the world’s black gold production.

After difficult discussions, the United Arab Emirates, eager to pump more, obtained an increase in the basis for calculating its crude production quota, according to the new table published by OPEC.

On the other hand, Angola, Congo and Nigeria in particular, reluctant at first, have seen their targets lowered, which they are struggling to achieve.

We managed to agreewelcomed Bruno Jean-Richard Itoua, Congolese Minister of Hydrocarbons. We are very happyhe insisted.

Riyadh’s gesture comes as prices have fallen in recent months despite the surprise announcement in early April of drastic cuts.

This strategy has effectively failed to lift prices in a market depressed by fears of a global economic recession, rate hikes by the main central banks and the laborious recovery of demand in China as it emerges from the anti-COVID restrictions.

Brent, the benchmark for crude in Europe, is currently trading at $76 a barrel, and its American equivalent, WTI at $71, far from the peaks recorded in March 2022 at the start of the conflict in Ukraine (nearly $140).

Signs of disagreement between Riyadh and Moscow

As signs of discord between Riyadh and Moscow threatened to disrupt the meeting, OPEC+ displayed a united frontcommented for AFP Giovanni Staunovo, analyst of UBS. They obviously have divergent views but they have demonstrated that they know how to work together.

We had no disagreements. It is a joint decision taken in the interest of the marketassured Mr. Novak.

Despite its commitments, Russia is reluctant to further tighten the floodgates of black gold – manna used to finance its military offensive against Ukraine.

Moreover, Moscow would hardly benefit from higher prices. Due to Western sanctions, only Russian oil priced at or below $60 can continue to be delivered. Beyond this ceiling, it is forbidden for companies to provide services allowing maritime transport (freight, insurance, etc.).

In contrast, Saudi Arabia needs higher prices to balance its budgetexplains Barbara Lambrecht, of Commerzbank, who evokes a break-even point around $80 a barrel.

After Riyadh’s announcement, analysts expect positive market reactionselon Tamas Varga, de PVM Energy.

In the longer term, however, a fall in demand under inflationary pressure could cancel out the effect of this reduction in supplyshe warns.

The alliance has already warned that it will convene an emergency meeting if necessary. For now, the next meeting in the Austrian capital has been set for November 26.

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