[1/5] Austrian police officers stand in front of the OPEC headquarters in Vienna, Austria, June 3, 2023. Portal/Leonhard Foeger
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VIENNA, June 3 (Portal) – OPEC and its allies began two-day meetings on Saturday that could culminate in further production cuts of up to 1 million barrels a day, OPEC+ sources told Portal as the group grappled with falling oil prices is facing and a looming supply glut.
OPEC+, which includes the Organization of Petroleum Exporting Countries and its Russian-led allies, produces around 40% of the world’s crude oil, meaning its policy decisions can have a major impact on oil prices.
Three OPEC+ sources told Portal on Friday that cuts would be discussed as options for Sunday’s meeting. Two other sources said further cuts were unlikely.
OPEC held a separate brief meeting on Saturday, but ministers did not comment on possible policy decisions afterwards.
According to the three sources, the cuts could total 1 million bpd, in addition to the existing 2 million bpd cuts and the 1.6 million bpd voluntary cuts that were surprisingly announced in April and went into effect in May.
If approved, the total volume of reductions would increase to 4.66 million bpd, or approximately 4.5% of global demand.
“That number is premature, we haven’t addressed those things (yet),” Iraqi Oil Minister Hayan Abdel-Ghani said ahead of the meetings when asked about a potential 1 million bpd cut.
Normally, production cuts come into effect a month after they are agreed, but ministers could agree to implement them later. You could also choose to keep production constant.
Western nations accuse OPEC of manipulating oil prices and weakening the global economy through high energy costs. The West has also accused OPEC of siding too much with Russia over Moscow’s invasion of Ukraine, despite Western sanctions.
In response, OPEC insiders and observers have said that Western money-printing over the past decade has fueled inflation and forced oil-producing countries to take measures to preserve the value of their main export.
Asian countries like China and India have bought the lion’s share of Russia’s oil exports and have refused to join Western sanctions against Russia.
BASIC TALKS
OPEC+ ministers will meet in Vienna on Sunday from 10 a.m. (0800 GMT), three hours earlier than originally scheduled, and will hold a full session from 11 a.m.
Two OPEC sources said ministers could also discuss new production baselines, from which each member will make cuts.
Such talks were previously controversial.
West African countries like Nigeria or Angola have long been unable to produce in line with their targets, but rejected lower baselines because new targets could force them to make real cuts.
In contrast, the UAE has insisted on hitting higher baselines in line with its growing production capacity, but that would mean its share of the overall cuts would fall.
“We look forward to a resolution that will ensure the sustainability of the supply and demand balance,” UAE Energy Minister Suhail Al Mazroui said ahead of the meetings.
Ministers spoke to reporters in their hotels in Vienna. OPEC has denied reporters from Portal and other news media access to its headquarters.
The surprise production announcement in April helped oil prices rise by about $9 a barrel to above $87, but they fell quickly under pressure from concerns about global economic growth and demand. International benchmark Brent settled at $76 on Friday.
Last week, Saudi Arabia’s energy minister, Prince Abdulaziz, said investors who are shorting or betting on oil prices should “watch out,” in what many market observers interpreted as a warning of further supply cuts.
The International Energy Agency anticipates that global oil demand will continue to grow in the second half of 2023, potentially leading to an increase in oil prices.
However, analysts at JPMorgan said OPEC did not act quickly enough to adjust supply to record US production levels and better-than-expected Russian exports.
“There’s just too much supply,” JPMorgan analysts said in a note, adding that additional cuts could be about 1 million bpd.
Reporting by Ahmad Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne. writing by Dmitry Zhdannikov; Adaptation by David Holmes, Frances Kerry and Christina Fincher
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