Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud arrives at the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna on June 3, 2023.
Joe Klamar | Afp | Getty Images
The influential Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, on Sunday made no changes to their planned oil output cuts for this year as coalition leader Saudi Arabia announced further voluntary cuts.
OPEC+ also announced in a statement that it will limit combined oil production to 40.463 million barrels per day from January to December 2024.
Earlier in October, the alliance agreed to a drop of 2 million barrels per day. Some OPEC+ members as well 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 that were originally due to expire after 2023 would now be extended to the end of 2024, in comments reported by Reuters.
Asked whether Russia, hit by Western sanctions, would meet its pledge to cut production, UAE Oil Minister Suhail al-Mazrouei admitted on Sunday that there were discrepancies between figures provided by Moscow and independent estimates of Russian production by analysts and trade publications.
“Some of the things we’ve seen from Russia on a technical basis… [don’t] we will add up from some independent sources and we will address those independent sources,” he said during a press briefing after the OPEC+ meeting.
Saudi Arabia’s Energy Ministry said Riyadh will introduce another voluntary monthly cut of 1 million barrels per day starting this July, which can be extended. This will bring the kingdom’s total voluntary decline to 1.5 million barrels per day over the period, reducing its output to 9 million barrels.
Saudi Arabia’s energy minister called the kingdom’s additional voluntary cut of 1 million barrels per day a “Saudi lollipop” and stressed that it would be implemented.
“We have always honored our commitments,” he said during a press briefing on Sunday. He left unanswered whether the kingdom would extend its voluntary cuts beyond July.
The move by the 23-nation alliance follows contentious talks that stretched late into the night on Saturday, 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.
OPEC+ is at stake in a battle to reconcile the outlook for tighter supply in the second half of the year, current macroeconomic and inflation concerns and inter-group diplomacy.
Saudi Arabia’s oil minister, Prince Abdulaziz bin Salman, warned oil speculators to “beware” ahead of a meeting in late May, in comments that were widely read as a harbinger of further supply cuts.
It remains to be seen whether the 2024 output cut will provide long-term support to current oil futures prices when markets open on Monday, after months of pressure from global financial turmoil since the start of the year.
Brent futures it last settled at $76.13 a barrel on Friday, with several OPEC+ delegates noting a widening gap between prices and supply-demand fundamentals.
The producers’ alliance also agreed to revise the baselines – the starting level from which producers have cut output during the 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 into a higher output ceiling. Crucially, the baselines are often reused in new iterations of OPEC+ deals, and their revisions and subsequent adjustments are often contentious, meaning they could bind producers in the long term.
OPEC heavyweight UAE has long vied for an upward revision to its baseline and received some such relief in July 2021.
Meanwhile, the alliance’s other producers, such as Angola and Nigeria, have long failed to increase their production to their OPEC+ quotas amid sabotage, capacity depletion and underinvestment – but potential changes to their baselines to reflect these were not previously formally discussed because of the sensitivity of these of the discussion, delegates told CNBC.